<HTML>
<HEAD>
<TITLE>S-1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>As filed with the Securities and Exchange Commission on
September&nbsp;29, 2005</B>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Registration
No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 1.5pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES</B>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Form&nbsp;S-1</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>UNDER</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Castle Brands Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<I>(Exact Name of Registrant as Specified in Its Charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>2080</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>41-2103550</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or Other Jurisdiction of<BR>
    Incorporation or Organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer Identification Number)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>570 Lexington Avenue, 29th&nbsp;Floor</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>New York, NY 10022</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>(646)&nbsp;356-0200</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<I>(Address, Including Zip Code, and Telephone Number, Including
Area Code,</I>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<I>of Registrant&#146;s Principal Executive Offices)</I>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Mark Andrews</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Chief Executive Officer</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Castle Brands Inc.</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>570 Lexington Avenue, 29th&nbsp;Floor</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>New York, NY 10022</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>(646)&nbsp;356-0200</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<I>(Name, Address Including Zip Code, and Telephone Number,</I>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<I>Including Area Code, of Agent for Service)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Copies to:</I></B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>John E. Schmeltzer,&nbsp;III,&nbsp;Esq.<BR>
    Andrew P. Beame,&nbsp;Esq.<BR>
    Patterson Belknap Webb&nbsp;&#38; Tyler LLP<BR>
    1133 Avenue of the Americas<BR>
    New York, NY 10036<BR>
    Telephone: (212)&nbsp;336-2000<BR>
    Facsimile: (212)&nbsp;336-2222</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Elise M. Adams,&nbsp;Esq.<BR>
    Christin R. Cerullo, Esq.<BR>
    Blank Rome LLP<BR>
    405 Lexington Avenue<BR>
    New York, NY 10174<BR>
    Telephone: (212)&nbsp;885-5000<BR>
    Facsimile: (212)&nbsp;885-5001</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Approximate date of commencement of proposed sale to the
public:</B> As soon as practicable after the effective date of
this registration statement.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum Aggregate</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Title of Each Class of Securities to Be Registered</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Offering Price(1)(2)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registration Fee</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock, $.01&nbsp;par value per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $31,625,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $3,722.26</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Includes shares of common stock issuable upon exercise of
    underwriters&#146; over-allotment option.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule&nbsp;457(o) under the Securities Act of
    1933, as amended.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.5pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<FONT color="#E8112D">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.

</FONT>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 11pt; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT color="#E8112D">SUBJECT TO COMPLETION, DATED SEPTEMBER
29, 2005.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>2,500,000&nbsp;Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y12717y1271700.gif" alt="(CASTLE BRANDS LOGO)">
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>Common Stock</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This is an initial public offering of shares of our common
stock. All of the shares to be sold in the offering are being
sold by us.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
common stock. It is currently estimated that the initial public
offering price per share will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We have applied to have our common stock quoted on the American
Stock Exchange under the symbol &#147;ROX.&#148;
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in our common stock involves risks. See &#147;Risk
Factors&#148; beginning on page&nbsp;8 to read about factors you
should consider before buying shares of our common stock.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Initial public offering price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting discounts and commissions (1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds to us (before the non-accountable expense allowance and
    other offering expenses)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 31%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Does not include a non-accountable expense allowance payable to
    the underwriters in the amount of $125,000.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have granted the underwriters a 30-day option to purchase up
to an additional 375,000&nbsp;shares of common stock from us at
the initial public offering price less the underwriting
discount, solely to cover over-allotments.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters expect to deliver the shares to investors in
this offering in New York, New York on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 14pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B> Oppenheimer&nbsp;&#38; Co.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">

</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 14pt;">

<TR>
    <TD width="23%"></TD>
    <TD width="77%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B> ThinkEquity Partners LLC</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;">

</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 14pt;">

<TR>
    <TD width="46%"></TD>
    <TD width="54%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B> Ladenburg Thalmann&nbsp;&#38; Co. Inc.</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;">

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>[Artwork to be filed by amendment]</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
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</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>Prospectus Summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Forward-Looking Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Market Data and Forecasts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Use of Proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Dividend Policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Dilution</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Selected Consolidated Financial Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Certain Relationships and Related Party
    Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Security Ownership of Certain Beneficial
    Owners and Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Description of Securities</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Shares Eligible for Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Legal Matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Where You Can Find Additional
    Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>Index to Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv3w1.txt">EX-3.1: FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv3w2.txt">EX-3.2: FORM OF AMENDED AND RESTATED BYLAWS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv4w2.txt">EX-4.2: SHAREHOLDERS AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w1.txt">EX-10.1: EXPORT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w2.txt">EX-10.2: AMENDMENT NO. 1 TO EXPORT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w3.txt">EX-10.3: NATIONAL DISTRIBUTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w4.txt">EX-10.4: SUBSCRIPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w5.txt">EX-10.5: STOCKHOLDERS AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w6.txt">EX-10.6: PROMISSORY NOTE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w7.txt">EX-10.7: AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w8.txt">EX-10.8: SUPPLY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w9.txt">EX-10.9: AMENDMENT NO. 1 TO SUPPLY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w10.txt">EX-10.10: AMENDED AND RESTATED WORLDWIDE DISTRIBUTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w11.txt">EX-10.11: BOTTLING AND SERVICES AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w12.txt">EX-10.12: AMENDMENT TO BOTTLING AND SERVICES AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w13.txt">EX-10.13: AMENDED AND RESTATED CONVERTIBLE NOTE PURCHASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w14.txt">EX-10.14: AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w15.txt">EX-10.15: AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w16.txt">EX-10.16: CONVERTIBLE PROMISSORY NOTE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w17.txt">EX-10.17: LICENSE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w20.txt">EX-10.20: EMPLOYMENT AGREEMENT WITH KEITH A. BELLINGER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w21.txt">EX-10.21: SUMMARY OF EMPLOYMENT AGREEMENT WITH MATTHEW F. MACFARLANE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w22.txt">EX-10.22: NON-COMPETITION DEED</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w23.txt">EX-10.23: LETTER AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w24.txt">EX-10.24: LETTER AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w25.txt">EX-10.25: LETTER CONSULTING AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w26.txt">EX-10.26: LETTER CONSULTING AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w27.txt">EX-10.27: SUPPLY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w28.txt">EX-10.28: AMENDMENT AND CONSENT TO SUPPLY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w29.txt">EX-10.29: 2003 STOCK INCENTIVE PLAN, AS AMENDED</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w30.txt">EX-10.30: AMENDMENT TO CASTLE BRANDS INC. 2003 STOCK INCENTIVE PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w31.txt">EX-10.31: LETTER AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w32.txt">EX-10.32: SUBLEASE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w33.txt">EX-10.33: INDENTURE OF SUBLEASE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w34.txt">EX-10.34: OFFICE LEASE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w35.txt">EX-10.35: FIRST AMENDMENT TO OFFICE LEASE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w36.txt">EX-10.36: SECOND AMENDMENT TO OFFICE LEASE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w37.txt">EX-10.37: THIRD AMENDMENT TO OFFICE LEASE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w38.txt">EX-10.38: FOURTH AMENDMENT TO OFFICE LEASE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w39.txt">EX-10.39: FIFTH AMENDMENT TO OFFICE LEASE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w40.txt">EX-10.40: FIRST SUPPLEMENTAL TRUST INDENTURE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w41.txt">EX-10.41: FIRST AMENDED AND RESTATED TRUST INDENTURE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w42.txt">EX-10.42: 9% SECURED NOTE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w43.txt">EX-10.43: GENERAL SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w44.txt">EX-10.44: FIRST AMENDMENT TO GENERAL SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w45.txt">EX-10.45: GUARANTY PAYMENT AND PERFORMANCE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w46.txt">EX-10.46: FIRST AMENDMENT TO GUARANTEE OF PAYMENT AND PERFORMACE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w47.txt">EX-10.47: COLLATERAL AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w48.txt">EX-10.48: FIRST AMENDMENT TO COLLATERAL AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w49.txt">EX-10.49: CREDIT FACILITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w50.txt">EX-10.50: ACCOUNTS RECEIVABLE CREDIT FACILITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv10w51.txt">EX-10.51: CONTRACT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv16w1.txt">EX-16.1: LETTER FROM GRODSKY CAPORRINO & KAUFMAN, PC</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv21w1.txt">EX-21.1: LIST OF SUBSIDIARIES OF THE REGISTRANT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv23w1.txt">EX-23.1: CONSENT OF EISNER LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv23w2.txt">EX-23.2: CONSENT OF BDO SIMPSON XAVIER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12717exv23w3.txt">EX-23.3: CONSENT OF BDO SIMPSON XAVIER</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 30%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>You should rely only on the information contained in this
prospectus. No dealer, salesperson or other person is authorized
to give information that is not contained in this prospectus.
This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any jurisdiction where the
offer or sale is not permitted. The information contained in
this prospectus is correct only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of these securities.</B>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Trademarks</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus includes the names of our brands, which
constitute trademarks or trade names which are proprietary to
and/or registered in our name or in the name of one of our
subsidiaries or related companies, including, but not limited
to, Castle
Brands<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>,
Boru&#174;, Crazzberry&#174;, Brady&#146;s&#174;, Knappogue
Castle Whiskey&#174;,
Clontarf<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>,
Sea Wynde&#174;, Celtic Crossing&#174; and British Royal Navy
Imperial
Rum<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>;
and trademarks with respect to brands for which we have certain
exclusive distribution rights and which are proprietary to
and/or registered in the names of third parties, such as
Pallini&#174;, which is owned by I.L.A.R. S.p.A., and
Gosling&#146;s<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>,
Gosling&#146;s<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
Black Seal&#174;,
Gosling&#146;s<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
Gold Bermuda
Rum<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>,
Gosling&#146;s<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
Old
Rum<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
which are owned by Gosling Brothers Limited. This prospectus
also contains other brand names, trade names, trademarks or
service marks of other companies and these brand names, trade
names, trademarks or service marks are the property of those
other companies.
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">PROSPECTUS SUMMARY</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROSPECTUS SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This summary highlights information contained elsewhere in
this prospectus and does not contain all the information that
you should consider before investing in our common stock. You
should read this entire prospectus carefully, including
&#147;Risk Factors&#148; and our consolidated financial
statements and related notes, before making an investment
decision. All references to &#147;we,&#148; &#147;us,&#148;
&#147;our,&#148; or &#147;our company&#148; refer to Castle
Brands Inc. and, where appropriate, our consolidated direct and
indirect subsidiaries.</I>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our company</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are an emerging developer and global marketer of premium
branded spirits within four growing categories of the spirits
industry: vodka, rum, Irish whiskey and liqueurs/cordials. Since
our formation in 1998, we have invested over $60&nbsp;million in
capital to develop our operating platform, acquire and grow our
branded portfolio of distinctive premium spirits and establish
U.S. and international sales and distribution. Our premium
spirits brands include, among others, Boru vodka, Gosling&#146;s
rum, Knappogue Castle Whiskey and Pallini Limoncello.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For our fiscal year ended March&nbsp;31, 2005 and the three
months ended June&nbsp;30, 2005, we recorded sales of
approximately 170,000 cases and 61,000 cases, respectively,
which are measured based on the industry standard of nine-liter
equivalent cases, and revenues of approximately
$12.6&nbsp;million and $4.5&nbsp;million, which represented
increases of 161% and 108% from revenues recorded for the prior
comparable fiscal periods. These increases reflect both organic
growth and growth from additions to our brand portfolio. We
intend to continue our current growth through further market
penetration of our brands, as well as through strategic
relationships and acquisitions of both established and emerging
spirits brands with global growth potential.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have incurred losses since inception and had an accumulated
loss of $33.2&nbsp;million as of June&nbsp;30, 2005. We believe
that we will continue to incur sizeable net losses for the
foreseeable future as we expect to make significant investment
in product development and sales and marketing and to incur
significant administrative expenses as we seek to grow our
current and future brands.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since December 2003, we have acquired The Roaring Water Bay
Spirits Group Limited and its affiliated companies (adding Boru
vodka, Brady&#146;s Irish cream and the Clontarf Irish whiskeys
to our portfolio); entered into an exclusive marketing agreement
with I.L.A.R. S.p.A., a family-owned Italian spirits company
founded in 1875 (adding Pallini Limoncello to our portfolio);
and established a strategic export venture, of which we own 60%,
with the Gosling family in Bermuda (adding the Gosling&#146;s
rums to our portfolio). We believe that these recent brand
additions, together with our already existing brands, provide us
with a strong base from which we can grow our business.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our brands</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="8%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    <B><I>Boru vodka</I></B>, our leading brand, was the first, and
    continues to be the largest selling, premium vodka produced in
    Ireland. Boru vodka is an ultra-pure, quadruple distilled and
    specially filtered premium vodka with three flavor extensions
    (citrus, orange and crazzberry).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    <B><I>Gosling&#146;s rums</I></B>, a family of premium rums with
    a 150-year history, for which we are, through our export
    venture, the exclusive marketer outside of Bermuda, including
    the award-winning <B><I>Gosling&#146;s Black Seal </I></B>rum;
    and <B><I>Sea Wynde</I></B>, a premium rum developed and
    introduced by us in 2001.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    <B><I>Knappogue Castle Whiskey</I></B>, a vintage-dated premium
    single-malt Irish whiskey; <BR>
     <B><I>Knappogue Castle 1951</I></B>, one of the oldest and
    rarest commercially available Irish whiskeys; and the
    <B><I>Clontarf Irish whiskeys</I></B>, a family of premium Irish
    whiskeys, available in single malt, reserve and classic pure
    grain versions.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="8%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    <B><I>Brady&#146;s Irish cream</I></B>, a premium Irish cream
    liqueur; <B><I>Celtic Crossing</I></B>, a premium Irish liqueur;
    and, pursuant to an exclusive U.S.&nbsp;marketing arrangement,
    <B><I>Pallini Limoncello</I></B>, a premium Italian liqueur.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our competitive strengths</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that our competitive strengths include the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="8%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our portfolio of high quality, premium branded spirits with
    significant potential in the higher growth categories of the
    distilled spirits industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our extensive and already established U.S.&nbsp;distribution
    network within all 50&nbsp;states and our growing distribution
    network in Europe and elsewhere;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our substantial sales and marketing infrastructure, including an
    experienced sales force of 28 people and focused advertising,
    marketing and promotional programs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our highly qualified and experienced management team with
    successful track records in brand development, the distilled
    spirits industry and mergers and acquisitions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our flexible and efficient supply chain, which enables us to
    operate without owning or investing in distilleries, bottling
    plants or other similar facilities;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our ability to forge strategic relationships with owners of both
    emerging and established spirits brands seeking opportunities to
    expand beyond their home markets.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our growth strategy</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our objective is to continue building a distinctive portfolio of
global premium spirits brands, with a primary focus on
increasing both our total and individual brand case sales. To
achieve this, we intend to continue:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="8%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    <B><I>increasing market penetration of our existing spirits
    brands</I></B>. We intend to utilize our existing distribution
    relationships and sales expertise to achieve growth and gain
    additional market share within retail stores, bars and
    restaurants, both domestically and internationally; add
    experienced salespeople in selected markets; increase sales to
    national chain accounts; and expand our international
    distribution relationships;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    <B><I>building brand awareness through innovative marketing,
    advertising and promotional activities</I></B>. We intend to
    continue developing compelling campaigns to establish and
    reinforce the image of our brands through the coordinated
    efforts of our experienced internal marketing personnel and
    leading third-party design and advertising firms;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    <B><I>selectively adding new premium brands to our spirits
    portfolio</I></B>. 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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our corporate information</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a Delaware corporation formed in July 2003 by our
predecessor company, Great Spirits Company LLC, which was formed
in 1998. We maintain our principal executive offices at 570
Lexington Avenue, 29th&nbsp;Floor, New York, NY 10022. Our
telephone number is (646)&nbsp;356-0200. We also have offices in
Dublin, Ireland and Houston, Texas. Our website is located at
www.castlebrandsinc.com. The information contained on our
website or that can be accessed through our website does not
constitute part of this prospectus.
</DIV>
</DIV>

<P align="center" style="font-size: 11pt;">-2-

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Offering</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="31%"></TD>
    <TD width="1%"></TD>
    <TD width="68%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common stock offered</TD>
    <TD></TD>
    <TD valign="top">
    2,500,000&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock to be outstanding after this offering</TD>
    <TD></TD>
    <TD valign="top">
    10,950,493&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="top">
    We estimate that our net proceeds from this offering will be
    approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
    assuming an initial offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share of common stock, the midpoint of the range set forth on
    the cover page of this prospectus, after deducting the
    underwriting discounts and commissions and estimated offering
    expenses. We intend to use the proceeds from this offering for
    working capital and general corporate purposes and to:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    &#149;&nbsp;&nbsp;&nbsp;increase our sales and marketing
    activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    &#149;&nbsp;&nbsp;&nbsp;fulfill our capital commitments to our
    Gosling-Castle Partners Inc. strategic export venture;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    &#149;&nbsp;&nbsp;&nbsp;hire additional employees; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    &#149;&nbsp;&nbsp;&nbsp;repay a portion of our indebtedness.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Although we have no present commitments or agreements to do so,
    we may also use a portion of the net proceeds of this offering
    to invest in or acquire additional brands through mergers, stock
    or asset purchases, joint ventures, long-term exclusive
    distribution arrangements and/or other strategic relationships.
    See &#147;Use of Proceeds.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Proposed American Stock Exchange symbol</TD>
    <TD></TD>
    <TD valign="top">
    &#147;ROX&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Risk factors</TD>
    <TD></TD>
    <TD valign="top">
    See &#147;Risk Factors&#148; immediately following this
    prospectus summary to read about factors you should consider
    before buying shares of our common stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except where otherwise indicated, the information in this
prospectus assumes that the following events, each of which will
occur upon the consummation of this offering, have already
occurred:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the conversion of all of our Series&nbsp;A convertible preferred
    stock into 535,715&nbsp;shares of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the conversion of all of our Series&nbsp;B convertible preferred
    stock into 200,000&nbsp;shares of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the conversion of all of our Series&nbsp;C convertible preferred
    stock into 3,353,750&nbsp;shares of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our issuance of 133,857 shares of common stock in payment of all
    of the dividends accrued on our preferred stock through the
    estimated closing of this offering, including 112,244 shares
    issued in payment of the $752,707 in accrued dividends
    outstanding as of June&nbsp;30, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the conversion of all
    <FONT face="times new roman,times">&#128;</FONT>1,374,750
    ($1,658,773) principal amount of our 5% euro denominated
    convertible subordinated notes into 263,362&nbsp;shares of our
    common stock;&nbsp;and</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 11pt;">-3-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the conversion of $6.0&nbsp;million of the $15.0&nbsp;million
    principal amount of our 6%&nbsp;convertible notes into
    857,143&nbsp;shares of our common stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The number of shares of common stock to be outstanding after
this offering excludes the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    2,000,000&nbsp;shares of common stock reserved for issuance upon
    the exercise of stock options granted or that may be granted
    under our stock incentive plan, including 878,500&nbsp;shares of
    common stock reserved for issuance upon the exercise of
    currently outstanding stock options, with a weighted average
    exercise price of $6.83&nbsp;per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    10,000&nbsp;shares of common stock reserved for issuance upon
    the exercise of stock options granted outside of our stock
    incentive plan, with an exercise price of $6.00&nbsp;per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    598,618&nbsp;shares of common stock reserved for issuance upon
    the exercise of outstanding warrants, with a weighted average
    exercise price of $7.67&nbsp;per share;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    1,125,000&nbsp;shares of common stock reserved for issuance upon
    the conversion of $9.0&nbsp;million principal amount of our
    6%&nbsp;convertible notes, with a conversion price of $8.00 per
    share.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless otherwise indicated, the information in this prospectus
also assumes that the underwriters do not exercise their
over-allotment option to purchase up to 375,000 additional
shares of common stock from us.
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Currency Translation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The functional currency for our foreign operations is the euro
in Ireland and the British pound in the United Kingdom. With
respect to our consolidated financial statements, the
translation from the applicable foreign currencies to
U.S.&nbsp;dollars is performed for balance sheet accounts using
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 other comprehensive income. Gains
or losses resulting from foreign currency transactions are
included in other income/expenses.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Where in this prospectus we refer to amounts in euros or British
pounds, we have for your convenience also in certain cases
provided a translation of those amounts to U.S.&nbsp;dollars in
parenthesis. Where the numbers refer to a specific balance sheet
date account or financial statement period account, we have used
the exchange rate that was used to perform the translations in
connection with the applicable financial statement. In all other
instances, unless otherwise indicated, the translations have
been made using the exchange rates as of June&nbsp;30, 2005,
each as calculated from the Interbank exchange rates as reported
by Oanda.com. On June&nbsp;30, 2005, the exchange rate of the
euro dollar in exchange for U.S.&nbsp;dollars and the exchange
rate of the British pound in exchange for U.S.&nbsp;dollars were
<FONT face="times new roman,times">&#128;</FONT>1.00 =
U.S.&nbsp;$1.2066 (equivalent to U.S.&nbsp;$1.00 =
<FONT face="times new roman,times">&#128;</FONT>0.8288) for
euros and &#163;1.00 = U.S.&nbsp;$1.8048 (equivalent to
U.S.&nbsp;$1.00 = &#163;0.5541) for British pounds.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These translations should not be construed as representations
that the euro and British pound amounts actually represent
U.S.&nbsp;dollar amounts or could be converted into
U.S.&nbsp;dollars at the rates indicated.
</DIV>
</DIV>

<P align="center" style="font-size: 11pt;">-4-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Consolidated Financial Information</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following tables set forth summary consolidated financial
data and other data for the periods ended and as of the dates
indicated. The summary financial data for the fiscal years ended
March&nbsp;31, 2003, 2004 and 2005 have been derived from our
historical audited consolidated financial statements. The
summary consolidated financial data presented as of and for the
three months ended June&nbsp;30, 2004 and 2005 have been derived
from our unaudited interim consolidated financial statements,
which in the opinion of our management include all adjustments,
consisting of only normal recurring adjustments, that we
considered necessary for a fair presentation of our financial
position and results of operations as of and for such unaudited
periods. The historical results are not necessarily indicative
of results to be expected for future periods, and results for
the three month period ended June&nbsp;30, 2005 are not
necessarily indicative of results that may be expected for the
entire year ending March&nbsp;31, 2006. You should read the
following summary financial data and other data in conjunction
with our consolidated financial statements, including the
related notes, and the section entitled &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, we acquired The Roaring Water Bay Spirits
Group Limited and The Roaring Water Bay Spirits Marketing and
Sales Company Limited, together, with their subsidiaries,
referred to as Roaring Water Bay. The summary financial and
other data presented in the tables below includes the results of
operations of Roaring Water Bay commencing as of the
December&nbsp;1, 2003 closing date of the acquisition. If we
assume, for comparative purposes only, that the acquisition
occurred as of April&nbsp;1, 2003, the beginning of our fiscal
year ended March&nbsp;31, 2004, our unaudited pro forma results
of operations for our fiscal year ended March&nbsp;31, 2004
would have been: sales, net $8.6&nbsp;million; gross profit
$3.5&nbsp;million; net loss $(6.5)&nbsp;million; and net loss
per common share&nbsp;&#150; basic and diluted $(2.92). These
pro forma results are not necessarily indicative, however, of
the results of operations that actually would have resulted had
the acquisition occurred on April&nbsp;1, 2003 or of future
results.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2005, we entered into a distribution agreement with
Gosling&#146;s Export (Bermuda) Limited, referred to as
Gosling&#146;s Export, giving us the exclusive distribution
rights with respect to the Gosling&#146;s rum products in the
United States and, subsequently, in the United Kingdom.
Thereafter, we expanded this relationship in February 2005, when
we purchased a 60% controlling interest in a newly formed entity
now named Gosling-Castle Partners Inc., a strategic venture that
was formed to acquire, through an export agreement with
Gosling&#146;s Export, the global (excluding Bermuda)
distribution rights with respect to the Gosling&#146;s rums,
including an assignment by Gosling&#146;s Export to
Gosling-Castle Partners of its rights under our January 2005
distribution agreement. This export agreement was entered into
with Gosling&#146;s Export in February 2005, prior to our
investment in Gosling-Castle Partners, and became effective on
April&nbsp;1, 2005. The summary financial and other data
presented in the tables below include our sales of
Gosling&#146;s products in the United States and the United
Kingdom under our distribution agreement commencing as of its
January&nbsp;1, 2005 effective date and include the results of
operations of Gosling-Castle Partners commencing as of the
February&nbsp;18, 2005 closing date of our investment in such
entity, with adjustments for minority interest. Gosling-Castle
Partners had no operations prior to its February 2005 formation
and no meaningful operations prior to the April&nbsp;1, 2005
commencement of its export agreement.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The &#147;other data&#148; presented below relates to our case
sales, which are measured based on the industry standard of
nine-liter equivalent cases, an important measure in our
industry that we use to evaluate the effectiveness of our
operations and overall financial performance. We believe that by
providing this information investors can better assess trends in
our business. Net sales per case is total net sales for the
applicable period presented, divided by the total number of
cases sold during the period. Gross profit per case and selling
expense per case are derived by dividing our gross profit and
selling expense, respectively, for the applicable period
presented by the number of cases sold for such period.
</DIV>
</DIV>

<P align="center" style="font-size: 11pt;">-5-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three months ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year ended March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>(unaudited)</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <B>Consolidated statement of operations data </B>(in thousands,
    except per share data):</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,647</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,138</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other (income)/expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(199</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,258</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,155</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,301</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,142</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,016</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(182</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(304</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(998</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(466</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(259</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,440</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,424</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,605</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,109</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,455</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,982</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,820</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,691</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss per common share&nbsp;&#151; basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding&nbsp;&#151; basic and
    diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net loss per common share&nbsp;&#151; basic and
    diluted(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.41</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma weighted average common shares outstanding&nbsp;&#151;
    basic and diluted(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,781</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other data </B>(unaudited):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of case sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,628</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales per case</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>74.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>74.19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit per case</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30.53</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expense per case</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>154.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>84.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>68.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>91.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53.19</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="3%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Assumes the conversion as of April&nbsp;1, 2004 of: all shares
    of preferred stock outstanding as of June&nbsp;30, 2005,
    including 535,715&nbsp;shares of Series&nbsp;A convertible
    preferred stock, 200,000&nbsp;shares of Series&nbsp;B
    convertible preferred stock and 2,991,250&nbsp;shares of
    Series&nbsp;C convertible preferred stock, into an aggregate of
    3,726,965&nbsp;shares of common stock; the accrued and unpaid
    preferred stock dividends of $752,707 outstanding as of
    June&nbsp;30, 2005 into 112,244&nbsp;shares of common stock;
    the&nbsp;$1.7&nbsp;million principal amount of our 5%&nbsp;euro
    denominated convertible notes outstanding as of June&nbsp;30,
    2005 into 263,362&nbsp;shares of common stock; and
    $4.0&nbsp;million of the $10.0&nbsp;million principal amount of
    our 6%&nbsp;convertible notes that was outstanding as of
    June&nbsp;30, 2005 into 571,429&nbsp;shares of common stock; for
    an aggregate of 4,674,000&nbsp;shares of common stock.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 11pt;">-6-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary balance sheet data</B>
</DIV>

<DIV align="left" style="font-size: 11pt;">
(in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 11pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 11pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 11pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 11pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(unaudited)</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Working capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (deficiency)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,084</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The &#147;pro forma&#148; information included in the summary
balance sheet data as of June&nbsp;30, 2005 gives effect at that
date to the following subsequent events:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our issuances in August 2005 of an additional
    362,500&nbsp;shares of our Series&nbsp;C convertible preferred
    stock and an additional $5.0&nbsp;million principal amount of
    our 6%&nbsp;convertible notes, for aggregate net proceeds to us
    of approximately $7.5&nbsp;million;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our accrual of additional preferred stock dividends on our
    convertible preferred stock from July&nbsp;1, 2005 through the
    estimated closing date of this offering in the aggregate amount
    of $145,246; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our issuance of an additional 5,343,827&nbsp;shares of our
    common stock upon (a) the conversion of all of our preferred
    stock, including the additional shares of Series&nbsp;C
    convertible preferred stock issued in August 2005, into
    4,089,465&nbsp;shares, (b)&nbsp;our 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 June&nbsp;30, 2005, with
    133,857&nbsp;shares of our common stock, and (c)&nbsp;the
    conversion of $7.7&nbsp;million of our indebtedness into
    1,120,505&nbsp;shares of our common stock, including
    $2.0&nbsp;million of the additional notes issued in August 2005
    for 285,714&nbsp;shares; all of which issuances will occur upon
    the consummation of this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The &#147;pro forma as adjusted&#148; information as of
June&nbsp;30, 2005 gives effect at that date to the foregoing
pro forma adjustments as well as to the following additional
events:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our sale of the 2,500,000&nbsp;shares of common stock in this
    offering at an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the midpoint of the range set forth on the cover page of
    this prospectus;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    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 $629,418 of our outstanding indebtedness
    as of June&nbsp;30, 2005.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 11pt;">-7-

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<DIV align="left" style="font-size: 10pt;">
<A name='102'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">RISK FACTORS</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>You should carefully consider the following risks and all
other information set forth in this prospectus before deciding
to invest in shares of our common stock. If any of the events or
developments described below actually occurs, our business,
financial condition and results of operations may suffer. In
that case, the trading price of our common stock may decline and
you could lose all or part of your investment.</I>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks related to our business</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our future success is highly uncertain and cannot be
predicted based upon our limited operating history.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although our predecessor was formed in 1998, most of our brands,
including Boru vodka, our leading brand, have only been acquired
or introduced by us since our formation in July 2003. As a
result, compared to most of our current and potential
competitors, we have a relatively short operating history and
our brands are early in their growth cycle. Additionally, we
anticipate acquiring brands in the future that are unlikely to
have established global brand recognition. Accordingly, it is
difficult to predict when or whether we will be financially and
operationally successful, making our business and future
prospects difficult to evaluate. In making your evaluation of
our prospects, you should consider that we are an emerging
company with products that, as yet, have limited brand
recognition and unproven global or broad-based market
acceptance. As a result, we may encounter many expenses, delays,
problems and difficulties that we have not anticipated and for
which we have not planned. If we are unable to address these
issues, if and when they arise, we may never be financially or
operationally successful.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We have a history of losses, we expect to experience
continuing losses for the foreseeable future, and we may never
achieve profitability.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have incurred losses since inception and had an accumulated
loss of $33.2&nbsp;million as of June&nbsp;30, 2005. We believe
that we will continue to incur sizeable net losses for the
foreseeable future as we expect to make continued and
significant investment in product development, and sales and
marketing and to incur significant administrative expenses as we
seek to grow our current and future brands. We also anticipate
that our cash allocations will exceed our income from sales for
the foreseeable future. Despite our anticipated aggressive
marketing expenditures, our products may never achieve
widespread market acceptance and may not generate sales and
profits to justify our investment. In addition, we may find that
our expansion plans are more costly than we currently anticipate
and that they do not ultimately result in commensurate increases
in our sales, which would further increase our losses. If we
continue to incur expenses at a greater rate than our revenues,
we may never achieve profitability.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our growth may be limited if we do not generate sufficient
cash to fund our operations. We may in the future need
additional financing to execute our business and continue our
growth, which may not be available on satisfactory terms or when
needed.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While the proceeds of this offering are expected to last us for
at least the next 12&nbsp;months, we may require additional
capital in the future on an accelerated basis to fund our
business or our growth strategy (including potential
acquisitions), due to changes in our operations, acceleration of
our growth strategy, lower than anticipated product sales,
increased marketing, advertising and other costs or other
events. If, at such time, we have not generated sufficient cash
from operations to finance those additional capital needs, we
will need to raise additional funds through private or public
equity and/or debt financing. We cannot assure you that, if and
when needed, additional financing will be available to us on
acceptable terms or at all. If additional capital is needed and
either unavailable or cost prohibitive, our growth may be
limited as we may need to change our business strategy to slow
the rate of, or eliminate, our expansion or reduce or curtail
our operations. In addition, any additional financing we
undertake could impose covenants upon us that restrict our
operating flexibility, and, if we issue
</DIV>

<P align="center" style="font-size: 11pt;">-8-

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<DIV align="left" style="font-size: 11pt;">
equity securities to raise capital, our existing stockholders
may experience dilution or the new securities may have rights
senior to those of our common stock.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We are dependent on a limited number of suppliers. Failure to
obtain satisfactory performance from our suppliers or loss of
our existing suppliers could cause us to lose sales, incur
additional costs and lose credibility in the marketplace. We
also have annual purchase obligations with certain suppliers.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We depend on a limited number of third-party suppliers for the
sourcing of all of our products, including both our own
proprietary brands and those we distribute for others. These
suppliers consist of third-party distillers, bottlers and
producers in the United States, Bermuda, the Caribbean and
Europe. We rely on the owners of Gosling&#146;s rum and Pallini
Limoncello to produce their brands for us. With respect to our
proprietary products, we, in several instances, rely on a single
supplier to fulfill one or all of the manufacturing functions
for one or more of our brands. For instance, The Carbery Group
is the sole distillery for Boru vodka, our leading brand; Irish
Distillers Limited is the sole provider of our single malt,
blended and grain Irish whiskey; Gaelic Heritage Corporation
Limited is the sole producer of our Celtic Crossing Irish
liqueur; and Terra Limited is not only the sole producer of our
Brady&#146;s Irish cream liqueur but also the only bottler of
both our Boru vodka and our Irish whiskeys. We do not have
long-term written agreements with all of our suppliers. In
addition, if we fail to complete purchases of products ordered
annually, certain suppliers have the right to bill us for
product not purchased during the period. The termination of our
written or oral agreements, or an adverse change in the terms of
these agreements could have a negative impact on our business.
If our suppliers increase their prices, we may not have
alternative sources of supply and may not be able to raise the
prices of our products to cover all or even a portion of the
increased costs. Our suppliers&#146; failure to perform
satisfactorily or the loss of our existing suppliers, especially
our key suppliers, could cause us to fail to meet orders for our
products, lose sales, incur additional costs and/or expose us to
product quality issues. In turn, this could cause us to lose
credibility in the marketplace and damage our relationships with
distributors, ultimately leading to a decline in our business
and results of operations.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We cannot yet act as our own importer of record in the United
States and rely entirely on MHW Ltd. to perform this function
for us. The loss of its services could thus significantly
interrupt our U.S.&nbsp;sales and harm our reputation, our
business and our results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the United States, there is a three-tier distribution system
for imported spirits: the imported brand is sold to a licensed
importer; the importer sells the imported brand to a wholesale
distributor; and the distributor sells the imported brand to
retail liquor stores, bars, restaurants and other outlets in the
states in which it is licensed to sell alcohol. While we own
most of our brands, we cannot yet act as our own importer as we
do not currently have any of the state licenses necessary to
sell our products to the distributors. We have, as a result,
historically depended on MHW Ltd. to serve in this capacity for
us. In addition to acting as importer of record for us, MHW also
provides and supervises storage and transportation of our
products to local wholesale distributors and provides several
accounting and payment related services to us. Until we are
licensed in a majority of the states and bring these services
in-house, the loss of MHW&#146;s services or its poor
performance, either nationally or at a state level, could
significantly interrupt or decrease our U.S.&nbsp;sales and harm
our reputation, our business and our results of operations. In
addition, while MHW purchases product from us to fill wholesale
orders, MHW is not liable to us for any unpaid balances due from
the distributors on these orders. Accordingly, the inability or
failure of MHW to collect accounts receivable from our
distributors could also cause a decline in our results of
operations.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, until recently, it was much more cost effective for
us to use MHW as our U.S.&nbsp;importer and to rely on its state
licenses rather than expend the resources necessary to set up
the required licensing infrastructure internally. At this stage
of our growth, however, our fees to MHW, which are based in part
on our case sale volumes, are now reaching the point where it
may be more economical for us to assume the role of importer
ourselves. While we have commenced this process,
</DIV>

<P align="center" style="font-size: 11pt;">-9-

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<DIV align="left" style="font-size: 11pt;">
we currently hold only the federal importer and wholesaler
license required by the Alcohol and Tobacco Tax and Trade
Bureau. Until we have obtained the requisite licenses in a
majority of the states, a process that could take as long as a
year, we must continue to rely on MHW to perform the importing
function for us and, if we continue to grow, pay increasing fees
to it for these services.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We are substantially dependent upon our independent wholesale
distributors. The failure or inability of even a few of our
distributors to adequately distribute our products within their
territories could harm our sales and result in a decline in our
results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are required by law to use state licensed distributors or, in
18&nbsp;states known as &#147;control states,&#148; state-owned
agencies performing this function, to sell our products to
retail outlets, including liquor stores, bars, restaurants and
national chains in the United States. We have established
relationships for our brands with wholesale distributors in each
state; however, failure to maintain those relationships could
significantly and adversely affect our business, sales and
growth. Over the past decade there has been increasing
consolidation, both intrastate and interstate, among
distributors. As a result, many states now have only two or
three significant distributors. In addition, there are several
distributors that now control distribution for not just one
state but several states. As a result, if we fail to maintain
good relations with a distributor, our products could in some
instances be frozen out of one or more markets entirely. The
ultimate success of our products also depends in large part on
our distributors&#146; ability and desire to distribute our
products to the desired U.S.&nbsp;target markets, as we rely
significantly on them for product placement and retail store
penetration. We have no distribution agreements or minimum sales
requirements with any of our distributors and they are under no
obligation to place our products or market our brands. Moreover,
all of them also distribute competitive brands and product
lines. We cannot assure you that our distributors will continue
to purchase our products, commit sufficient time and resources
to promote and market our brands and product lines or that they
can or will sell them to our desired or targeted markets. If
they do not, our sales will be harmed, resulting in a decline in
our results of operations.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While most of our international markets do not require the use
of independent distributors by law, we have chosen to conduct
our sales through distributors in all of our markets and,
accordingly, we face similar risks to those set forth above with
respect to our international distribution. In the Republic of
Ireland, one of our larger international markets, our
distributor has not historically carried all of our products,
and there are only a limited number of viable distributors.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The sales of our products could decrease significantly if we
cannot secure and maintain listings in the control states.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the control states, the state liquor commissions act in place
of distributors and decide which products are to be purchased
and offered for sale in their respective states. Products
selected for listing must generally reach certain volumes and/or
profit levels to maintain their listings. Products are selected
for purchase and sale through listing procedures which are
generally made available to new products only at periodically
scheduled listing interviews. Products not selected for listings
can only be purchased by consumers through special orders, if at
all. If, in the future, we are unable to maintain our current
listings in the 18 control states, or secure and maintain
listings in those states for any additional products we may
acquire, sales of our products could decrease significantly.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If we are unable to identify and successfully acquire
additional premium brands that are complementary to our existing
portfolio, our growth will be limited, and, even if they are
acquired, we may not realize planned benefits due to integration
difficulties or other operating issues.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A key component of our growth strategy is the acquisition of
additional premium spirits brands that are complementary to our
existing portfolio through acquisitions of such brands or their
corporate owners, either directly or through mergers, joint
ventures, long-term exclusive distribution arrangements and/or
other strategic relationships. If we are unable to identify
suitable brand candidates and
</DIV>

<P align="center" style="font-size: 11pt;">-10-

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<DIV align="left" style="font-size: 11pt;">
successfully execute our acquisition strategy our growth will be
limited. In addition, even if we are successful in acquiring
additional brands, we may not be able to achieve or maintain
profitability levels that justify our investment in, or realize
operating and economic efficiencies or other planned benefits
with respect to, those additional brands. The addition of new
products or businesses entails numerous risks with respect to
integration and other operating issues, any of which could have
a detrimental effect on our results of operations and/or the
value of our equity. These risks include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    difficulties in assimilating acquired operations or products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    unanticipated costs that could materially adversely affect our
    results of operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    negative effects on reported results of operations from
    acquisition related charges and amortization of acquired
    intangibles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    diversion of management&#146;s attention from other business
    concerns;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    adverse effects on existing business relationships with
    suppliers, distributors and retail customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    risks of entering new markets or markets in which we have
    limited prior experience;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the potential inability to retain and motivate key employees of
    acquired businesses.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, there are special risks associated with the
acquisition of additional brands through joint venture
arrangements. While we own a controlling interest in our
Gosling-Castle Partners Inc. strategic export venture, we may
not have the majority interest in, or control of, future joint
ventures that we may enter into. There is, therefore, risk that
our joint venture partners may at any time have economic,
business or legal interests or goals that are inconsistent with
our interests or goals or those of the joint venture. There is
also risk that our current or future joint venture partners may
be unable to meet their economic or other obligations and that
we may be required to fulfill those obligations alone.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our ability to grow through the acquisition of additional brands
will also be dependent upon the availability of capital to
complete the necessary acquisition arrangements. We intend to
finance our brand acquisitions through a combination of the
proceeds of this offering, our available cash resources, bank
borrowings and, in appropriate circumstances, the further
issuance of equity and/or debt securities. Acquiring additional
brands could have a significant effect on our financial
position, and could cause substantial fluctuations in our
quarterly and yearly operating results. Also, acquisitions could
result in the recording of significant goodwill and intangible
assets on our financial statements, the amortization or
impairment of which would reduce reported earnings in subsequent
years.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our quarterly operating results have fluctuated in the past
and may fluctuate significantly in the future rendering
quarter-to-quarter comparisons unreliable as indicators of
performance.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our industry is subject to seasonality, with peak sales in each
major category generally occurring in the fourth calendar
quarter, which is our third fiscal quarter. As a result, our
third fiscal quarter revenues (those for the quarter ending
December&nbsp;31)&nbsp;are generally significantly higher than
other quarters and, for the fiscal year ended March&nbsp;31,
2005, accounted for over 36% of our revenues for that year. Our
quarterly revenues and operating results have also varied in the
past for other reasons and are likely to continue to vary
significantly from quarter to quarter in the future. As a
result, we believe that quarter-to-quarter comparisons of our
revenues and operating results are not meaningful, rendering
them unreliable as indicators of performance.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Factors that could cause quarterly fluctuations include, but are
not limited to:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    seasonal purchasing patterns of distributors, retailers and
    consumers;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our and our suppliers&#146; ability to handle increased orders;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    delays in shipments of product from international suppliers;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our ability to procure adequate shipping containers and ships to
    transport our products;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our commencement or completion of a major marketing campaign;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    delays in obtaining raw materials such as bottles and packaging
    materials;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    changes in the U.S.&nbsp;or international economies;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    fluctuations in discretionary consumer spending;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    changes in consumer preferences;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    increases or decreases in U.S.&nbsp;or other federal excise
    taxes, or the aggregate effect of such tax changes in a number
    of U.S.&nbsp;states;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    changes in interest rates and terms of borrowing;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    significant fluctuations in the value of the U.S.&nbsp;dollar
    against other foreign currencies, which would affect the cost of
    product purchases and our cost of raw materials;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    fluctuations in commodity prices;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    new or revised regulatory requirements and accounting
    pronouncements;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    delays in the launch of new products, including the timing of
    government approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    alcohol advertising restrictions, limitations on hours or places
    of sale or other measures adopted to restrict beverage sales
    (whether in the United States or abroad);&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the loss or addition of a brand.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The international nature of our business adds operating
risks, which could negatively impact our business.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While we focus on approximately seven primary geographic
markets, including the United States, we also sell our products
in over 10 other countries. We also purchase spirits and other
materials from entities in Ireland, the United Kingdom, Bermuda,
Italy, Guyana, the Caribbean and other foreign countries. The
risks and challenges associated with conducting business
internationally can include, among others:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the need to develop new distributor relationships;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    fluctuations in currency exchange rates and currency
    devaluations;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    differences and unexpected changes in the regulatory environment;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    varying tax regimes;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    exposure to different legal standards and enforcement mechanisms
    and associated compliance costs;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    tariffs, duties, import/export controls and other trade barriers;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    longer accounts receivable payment cycles and difficulties in
    collecting accounts receivable;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    limited legal protection and enforcement of intellectual
    property rights;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    difficulties in staffing and managing foreign operations;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    potentially higher incidences of fraud;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    political instability and the possibility of wars and terrorist
    acts.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the fiscal year ended March&nbsp;31, 2005 and the three
months ended June&nbsp;30, 2005, non-U.S.&nbsp;operations
accounted for approximately&nbsp;47% and 37%, respectively, of
our revenues. Consequently, any negative impact from our
international business efforts could negatively impact the
operating results and financial condition of our business as a
whole.
</DIV>

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, gains and losses on the conversion of foreign
payments into U.S.&nbsp;dollars may contribute to fluctuations
in our results of operations, and fluctuating exchange rates
could cause reduced revenues and/or gross margins from
non-U.S.&nbsp;dollar-denominated international sales. Also, for
the fiscal year ended March&nbsp;31, 2005 and the three months
ended June&nbsp;30, 2005, euro denominated sales accounted for
approximately&nbsp;34% and 26%, respectively, of our total sales
volumes and British pound denominated sales accounted for
approximately&nbsp;13% and 11%, respectively, of our total sales
volume, so a substantial change in the rate of exchange between
the U.S.&nbsp;dollar and the euro or British pound could have a
significant adverse affect on our financial results. In
addition, our ability to acquire spirits, and produce and sell
our products at favorable prices, will depend in part on the
relative strength of the U.S.&nbsp;dollar. We may not be able to
insure or hedge against these risks and we may not be able to
comply with all the applicable regulations, even if we expend
substantial additional resources to do so.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our growth strategy may strain our resources. If we fail to
manage our growth, our ability to operate our business may be
harmed and we may be prevented from generating the revenue and
operating margins we expect.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since December 2003, our business has grown significantly in
size and complexity. This growth has placed, and is expected to
continue to place, significant demands on our management,
systems, internal controls and financial and physical resources.
In addition, our planned growth strategy, including the
expansion of our product lines and the addition of agency
brands, will continue to require increased development efforts
and increased sales, marketing and promotion expenditures. We
also expect that the future growth of our operations will
require us to further develop our financial and managerial
controls and reporting systems. This expansion will place
significant demands on our management and may strain our
operational and financial resources, as well as our
infrastructure. The international nature of our expansion and
our multiple markets could put further strain on those
resources. Our failure to effectively manage our growth could
disrupt our operations and ultimately prevent us from generating
the revenue and operating margins we expect.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Consumer preferences are constantly changing. If we fail to
anticipate these changes and adjust our inventory, portfolio and
markets accordingly, we could experience lower sales and
decreased margins.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our long-term success is dependent upon acceptance of our
products in the United States and various international markets.
Market acceptance is dependent on many complicated, interrelated
factors, many of which are not within our control, including
factors such as public perceptions and personal tastes.
Strengthening and maintaining our competitive position will
depend on our ability to offer products that have a strong
appeal to consumers. Even if we are successful in establishing
consumer awareness and acceptability for a brand, consumer
preferences may shift due to a variety of factors, including
changes in demographic and social trends, changes in dining,
recreational or leisure activity patterns and changes in the
economic climate. In order to be successful, we must accurately
anticipate consumer preferences and monitor and select the
appropriate markets for our brands. If we fail to anticipate
changes in consumer preferences and adjust our inventory,
portfolio and markets accordingly, we could experience lower
sales and decreased margins. In addition, any failure to keep
pace with changes in consumers&#146; tastes could result in lost
opportunities, which could also reduce our sales.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Adverse public opinion about alcohol could reduce demand for
our products.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Anti-alcohol groups have, in the past, successfully advocated
more stringent labeling requirements, higher taxes and other
regulations designed to discourage consumption of beverage
alcohol. More restrictive regulations, negative publicity
regarding alcohol consumption and/or changes in consumer
perceptions of the relative healthfulness or safety of beverage
alcohol could decrease sales and consumption of alcohol and thus
the demand for our products. This could, in turn, significantly
decrease both our revenues and our revenue growth, causing a
decline in our results of operations.
</DIV>

<P align="center" style="font-size: 11pt;">-13-
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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Class action or other litigation relating to alcohol abuse or
the misuse of alcohol could deplete our cash and divert our
personnel resources and, if successful, significantly harm our
business.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our industry faces the possibility of class action or other
similar litigation alleging that the continued excessive use or
abuse of beverage alcohol has caused death or serious health
problems. It is also possible that federal, state or foreign
governments could assert that the use of alcohol has
significantly increased government funded health care costs.
Litigation or assertions of this type have adversely affected
companies in the tobacco industry, and it is possible that we,
as well as our suppliers, could be named in litigation of this
type.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, lawsuits have been brought recently in nine states
alleging that beer and spirits manufacturers have improperly
targeted underage consumers in their advertising. The plaintiffs
in these actions claim that the defendants&#146; advertising
&#147;disproportionately&#148; targeted underage consumers, by
using youthful themes, humor and other subjects that are
attractive to young persons. Plaintiffs in these cases allege
that the defendants&#146; advertisements, marketing and
promotions violate the consumer protection or deceptive trade
practices statutes in each of these states and seek repayment of
the family funds expended by the underage consumers. While we
have not been named in these lawsuits, it is possible we could
be named in similar lawsuits in the future. Any class action or
other litigation asserted against us could be expensive and time
consuming to defend against, depleting our cash and diverting
our personnel resources and, if the plaintiffs in such actions
were to prevail, our business could be harmed significantly.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our and our strategic partners&#146; failure to protect our
respective trademarks, service marks and trade secrets could
compromise our competitive position and decrease the value of
our brand portfolio.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business and prospects depend in part on our, and with
respect to our agency or joint venture brands, our strategic
partners&#146;, ability to develop favorable consumer
recognition of our brands and trademarks. Although both we and
our strategic partners actively apply for registration of our
brands and trademarks, they could be imitated in ways that we
cannot prevent. In addition, we rely on trade secrets and
proprietary know-how, concepts and formulas. Our methods of
protecting this information may not be adequate. Moreover, we
may face claims of misappropriation or infringement of third
parties&#146; rights that could interfere with our use of this
information. Defending these claims may be costly and, if
unsuccessful, may prevent us from continuing to use this
proprietary information in the future and result in a judgment
or monetary damages being levied against us. We do not maintain
non-competition agreements with all of our executives and key
personnel or with some of our key suppliers. If competitors
independently develop or otherwise obtain access to our or our
strategic partners&#146; trade secrets, proprietary know-how or
recipes, the appeal, and thus the value, of our brand portfolio
could be reduced, negatively impacting our sales and growth
potential.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Failure to maintain and/or strengthen our competitive
position in the spirits industry could decrease our sales and/or
growth potential.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The beverage alcohol industry is highly competitive. We compete
on the basis of quality, price, brand recognition and
distribution strength. Our products compete with other beverage
alcohol products, in general, and premium brands, in particular,
for consumer purchases, as well as for distributor attention and
support, shelf space in retail stores, restaurant presence and
wholesaler attention. We compete with numerous national and
multinational developers and marketers of beverage alcohol, many
of which have far greater resources than we have. If we fail to
maintain and/or strengthen our competitive position in the
spirits industry, our sales and/or growth potential could be
harmed.
</DIV>

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We depend on our key personnel. If we lose the services of
any of these individuals or fail to hire and retain additional
management personnel as we grow, we may not be able to implement
our business strategy or operate our business effectively.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We rely on a small number of key individuals to implement our
plans and operations, including Mark Andrews, our chairman,
president and chief executive officer, Keith&nbsp;A. Bellinger,
our executive vice president and chief operating officer, and
T.&nbsp;Kelley Spillane, our senior vice president&nbsp;&#151;
U.S.&nbsp;sales, as well as our other executive officers and our
regional and foreign sales managers. While we currently maintain
key person life insurance coverage on the lives of
Messrs.&nbsp;Andrews and Spillane, that insurance may not be
available to us in the future or the proceeds therefrom may not
be adequate to replace the services of these managers. To the
extent that the services of any of these individuals become
unavailable, we will be required to hire other qualified
personnel, and we may not be successful in finding or hiring
adequate replacements. As a result, if we lose the services of
any of these individuals, we may not be able to implement our
business strategy or operate our business effectively. Further,
our management of future growth and our successful integration
of any acquired brands or companies will require substantial
additional attention from our senior management team and require
us to retain additional qualified management personnel and to
attract and train new personnel. Failure to successfully retain
and hire needed personnel to manage our growth and development
would harm our ability to implement our business plan and grow
our business.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If the recent change in status of the former managing
directors of our Irish subsidiaries, from full-time employees to
part time consultants, were to harm any of our foreign
distribution and supplier relationships, our international sales
could decline and our production activities could be
interrupted.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and the founders of our Irish subsidiaries, David Phelan and
Patrick Rigney, have recently modified
Messrs.&nbsp;Phelan&#146;s and Rigney&#146;s relationships with
our company from that of full-time employees of our Irish
subsidiaries and members of our board of directors to part-time
consultants, pursuant to consulting agreements with them
expiring in March&nbsp;2007 and June&nbsp;2006, respectively.
Messrs.&nbsp;Phelan and Rigney were instrumental in creating,
developing and marketing Boru vodka in Ireland, the
United&nbsp;Kingdom and a number of European countries, both
while with Roaring Water&nbsp;Bay and, following our merger in
2003, while with us. Messrs.&nbsp;Phelan and Rigney were also
responsible for developing the brand and obtaining its
production and bottling from The Carbery Group and Terra
Limited, both of which companies continue to be significant
suppliers of ours. If we were to lose any of our key
distributors or suppliers as a result of the change in status of
Messrs.&nbsp;Phelan or Rigney, or as a result of the loss of
their services upon the expiration of their consulting
agreements, we would need to engage other key distributors and
suppliers. If in such circumstances we were unable to engage
adequate replacement firms, our international sales could
decline and our production activities could be interrupted.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Regulatory decisions and changes in the legal, regulatory and
tax environment in the countries in which we operate could limit
our business activities or increase our operating costs and
reduce our margins.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business is subject to extensive regulation regarding
production, distribution, marketing, advertising and labeling of
beverage alcohol products in all of the countries in which we
operate. We are required to comply with these regulations and to
maintain various permits and licenses. We are also required to
conduct business only with holders of licenses to import,
warehouse, transport, distribute and sell spirits. We cannot
assure you that these and other governmental regulations
applicable to our industry will not change or become more
stringent. Moreover, because these laws and regulations are
subject to interpretation, we may not be able to predict when
and to what extent liability may arise. Additionally, due to
increasing public concern over alcohol-related societal
problems, including driving while intoxicated, underage
drinking, alcoholism and health consequences from the abuse of
alcohol, various levels of government may seek to impose
additional restrictions or limits on advertising or other
marketing activities promoting beverage alcohol products.
Failure to comply with any of the current or
</DIV>

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<DIV align="left" style="font-size: 11pt;">
future regulations and requirements relating to our industry and
products could result in monetary penalties, suspension or even
revocation of our licenses and permits, or those of MHW on whom
we are currently dependent to import and distribute our products
in the United States. Costs of compliance with changes in
regulations could be significant and could harm our business, as
we could find it necessary to raise our prices in order to
maintain profit margins, which could lower the demand for our
products and reduce our sales and profit potential.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the distribution of beverage alcohol products is
subject to extensive taxation both in the United States and
internationally (and, in the United States, at both the federal
and state government levels), and beverage alcohol products
themselves are the subject of national import and excise duties
in most countries around the world. An increase in taxation or
in import or excise duties could also significantly harm our
sales revenue and margins, both through the reduction of overall
consumption and by encouraging consumers to switch to
lower-taxed categories of beverage alcohol.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We could face product liability or other related liabilities
that increase our costs of operations and harm our
reputation.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although we maintain liability insurance and will attempt to
limit contractually our liability for damages arising from our
products, these measures may not be sufficient for us to
successfully avoid or limit liability. Our product liability
insurance coverage is limited to $1.0&nbsp;million per
occurrence and $2.0&nbsp;million in the aggregate and our
general liability umbrella policy is capped at
$10.0&nbsp;million. Further, any contractual indemnification and
insurance coverage we have from parties supplying our products
is limited, as a practical matter, to the creditworthiness of
the indemnifying party and the insured limits of any insurance
provided by these suppliers. In any event, extensive product
liability claims could be costly to defend and/or costly to
resolve and could harm our reputation.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Contamination of our products and/or counterfeit or
confusingly similar products could harm the image and integrity
of, or decrease customer support for, our brands and decrease
our sales.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The success of our brands depends upon the positive image that
consumers have of them. Contamination, whether arising
accidentally or through deliberate third-party action, or other
events that harm the integrity or consumer support for our
brands, could affect the demand for our products. Contaminants
in raw materials purchased from third parties and used in the
production of our products or defects in the distillation
process could lead to low beverage quality as well as illness
among, or injury to, consumers of our products and could result
in reduced sales of the affected brand or all of our brands.
Also, to the extent that third parties sell products that are
either counterfeit versions of our brands or brands that look
like our brands, consumers of our brands could confuse our
products with products that they consider inferior. This could
cause them to refrain from purchasing our brands in the future
and in turn could impair our brand equity and adversely affect
our sales and operations.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We must maintain a relatively large inventory of our products
to support customer delivery requirements, and if this inventory
is lost due to theft, fire or other damage or becomes obsolete,
our results of operations would be negatively impacted.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We must maintain relatively large inventories to meet customer
delivery requirements for our products. We are always at risk of
loss of that inventory due to theft, fire or other damage, and
any such loss, whether insured against or not, could cause us to
fail to meet our orders and harm our sales and operating
results. In addition, our inventory may become obsolete as we
introduce new products, cease to produce old products or modify
the design of our products&#146; packaging, which would increase
our operating losses and negatively impact our results of
operations.
</DIV>

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<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We have a material amount of goodwill and other intangible
assets. If, as a result of newly adopted accounting standards,
we are in the future required to write down a portion of this
goodwill and other intangible assets, it would increase our net
loss.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June&nbsp;30, 2005, goodwill represented approximately
$11.8&nbsp;million, or 27% of our total assets and other
intangible assets represented approximately $14.4&nbsp;million,
or 33% of our total assets. Goodwill is the amount by which the
costs of an acquisition accounted for using the purchase method
exceed the fair value of the net assets acquired. We adopted
Statement of Financial Accounting Standard No.&nbsp;142, or
SFAS&nbsp;No.&nbsp;142, entitled &#147;Goodwill and Other
Intangible Assets&#148; in its entirety, on April&nbsp;1, 2004.
Under SFAS&nbsp;No.&nbsp;142, goodwill and indefinite lived
intangible assets are no longer amortized, but instead are
subject to a periodic impairment evaluation based on the fair
value of the reporting unit. Any write-down of goodwill or
intangible assets resulting from future periodic evaluations
would increase our net loss and those increases could be
material.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our existing and future debt obligations could impair our
liquidity and financial condition.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June&nbsp;30, 2005, we had consolidated senior and
subordinated notes payable of approximately $20.1&nbsp;million
(or approximately $17.5&nbsp;million after giving pro forma
effect to our issuance of an additional $5.0 million principal
amount of our 6%&nbsp;convertible notes in August 2005 and our
conversion in connection with this offering of approximately
$7.7&nbsp;million principal amount of our outstanding
indebtedness into shares of our common stock). We are also
currently negotiating for a global credit facility and we may
incur additional debt in the future, under such credit line or
otherwise, to fund all or part of our capital requirements. Our
outstanding debt and future debt obligations could impair our
liquidity and could:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    make it more difficult for us to satisfy our other obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    impede us from obtaining additional financing in the future for
    working capital, capital expenditures, acquisitions and general
    corporate purposes;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we were to fail in the future to make any required payment
under agreements governing our indebtedness or fail to comply
with the financial and operating covenants contained in those
agreements, we would be in default as regards to that
indebtedness. A debt default could significantly diminish the
market value and marketability of our common stock. If the
lenders were to require immediate payment, we might not have
sufficient assets to satisfy our obligations under our credit
facility, our subordinated notes or our other indebtedness. Our
lenders would have the ability to require that we immediately
pay all outstanding indebtedness, and we might not have
sufficient assets to satisfy their demands. In such event, we
could be forced to seek protection under bankruptcy laws, which
could significantly harm our reputation and sales and
significantly reduce the price of our common stock.
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks related to this offering</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The market price for our common stock may be volatile, and
you may not be able to sell our stock at a favorable price or at
all.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There has been no public market for our common stock prior to
this offering, and an active and liquid public market for our
common stock may not develop or be sustained after this
offering. The securities markets have recently experienced
extreme price and volume fluctuations. This market
</DIV>

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<DIV align="left" style="font-size: 11pt;">
volatility, as well as general economic or political conditions,
could reduce the market price of our common stock regardless of
our operating performance. Additional factors that could cause
the market price of our common stock to rise and fall after this
offering, include the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    variations in our actual or anticipated operating results;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our introduction of new brands or brand extensions and our
    ability to maintain existing brands;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    performance of our suppliers and distributors of our brands;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    increases in the amount and timing of operating costs and
    capital expenditures relating to expansion of operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    recruitment or departure of key operating personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    changes in the estimates of our operating performance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    changes in recommendations by securities analysts of our common
    stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    announcements of regulatory investigations of our operations or
    those of our suppliers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    competition;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    changes in accounting principles;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    changes in federal, state or foreign regulations and taxes that
    may affect our industry.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the past, companies that have experienced volatility in the
market price of their stock have been the subjects of securities
class action litigation. If we were the subject of securities
class action litigation, it could result in substantial costs,
liabilities and a diversion of management&#146;s attention and
resources, which could have a material adverse effect upon our
business and operating results. Finally, after completion of the
offering, given our relatively small market capitalization and
public float, we could experience low daily trading volumes in
our stock, which could give even a single large volume sale of
our common stock the potential to negatively impact the market
price of our common stock.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may not be able to maintain our listing on the American
Stock Exchange, which may limit the ability of purchasers in
this offering to resell their common stock in the secondary
market.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although we have applied, and expect that as of the date of this
prospectus we will be approved, to list our common stock on the
American Stock Exchange, we might not meet the criteria for
continued listing on the American Stock Exchange in the future.
If we are unable to meet the continued listing criteria of the
American Stock Exchange and became delisted, trading of our
common stock could be conducted in the Over-the-Counter
Bulletin&nbsp;Board. In such case, an investor would likely find
it more difficult to dispose of our common stock or to obtain
accurate market quotations for it. If our common stock is
delisted from the American Stock Exchange, it will become
subject to the Securities and Exchange Commission&#146;s
&#147;penny stock rules,&#148; which impose sales practice
requirements on broker-dealers that sell that common stock to
persons other than established customers and &#147;accredited
investors.&#148; Application of this rule could make
broker-dealers unable or unwilling to sell our common stock and
limit the ability of purchasers in this offering to resell their
common stock in the secondary market.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If you purchase shares of our common stock in this offering,
you will suffer immediate and substantial dilution in the net
tangible book value of your shares and may be subject to
additional future dilution.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior investors have paid less per share for our common stock
than the price in this offering. The initial public offering
price is substantially higher than the per share net tangible
book value of our
</DIV>

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common stock immediately after this offering. Therefore, based
on an assumed offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, the midpoint of the price range set forth on the cover
page of this prospectus, if you purchase our common stock in
this offering, you will suffer immediate and substantial
dilution of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. If the underwriters exercise their over-allotment option,
or if outstanding options and warrants to purchase our common
stock are exercised, you will experience additional dilution.
Any future equity issuances will result in even further dilution
to holders of our common stock.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our executive officers, directors and principal stockholders
will continue to own a substantial percentage of our voting
stock after this offering, which will likely allow them to
control matters requiring stockholder approval. They could make
business decisions for us with which you disagree and that cause
our stock price to decline.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the closing of this offering, our executive officers,
directors and principal stockholders will beneficially own
approximately 50% of our common stock. As a result, if they act
in concert, they could control matters requiring approval by our
stockholders, including the election of directors, and could
have the ability to prevent or cause a corporate transaction,
even if other stockholders, including those who purchase shares
in this offering, oppose such action. This concentration of
voting power could also have the effect of delaying, deterring,
or preventing a change of control or other business combination,
which could cause our stock price to decline.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Future sales of our common stock may cause the prevailing
market price to decrease and impair our capital raising
abilities.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately following this offering, we will have
10,950,493&nbsp;shares of common stock outstanding (assuming the
underwriters do not exercise their over-allotment option),
derivative securities, consisting of stock options, warrants and
convertible notes outstanding, that are exercisable or
convertible for the purchase of an additional
2,612,118&nbsp;shares of our common stock and an additional
1,121,500 shares of common stock reserved for issuance upon the
exercise of options that may be granted under our stock
incentive plan. We will also have an additional
30,315,889&nbsp;shares of our common stock, and
5,000,000&nbsp;shares of blank check preferred stock, authorized
and available for issuance, which we may, in general, issue
without any action or approval by our stockholders, including in
connection with acquisitions or otherwise.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2,500,000&nbsp;shares sold in this offering will be freely
tradable, except for any shares purchased by our
&#147;affiliates&#148; as defined in Rule&nbsp;144 under the
Securities Act of 1933. Holders of the other
8,450,493&nbsp;shares that will be outstanding and holders of
our derivative securities have agreed with the underwriters,
subject to certain exceptions, not to dispose of any of their
securities for a period of 180&nbsp;days following the date of
this prospectus, except with the prior written consent of the
underwriters. After the expiration of this 180-day lock-up
period, these shares may be sold in the public market, subject
to prior registration or qualification for an exemption from
registration, including, in the case of shares held by our
affiliates, compliance with the volume restrictions of
Rule&nbsp;144. The holders of substantially all of the
8,450,493&nbsp;shares, as well as the holders of warrants
exercisable for the purchase of 598,618&nbsp;shares, are also
entitled to certain piggy back registration rights with respect
to the public resale of their shares. In addition, following
this offering, we intend to file a registration statement
covering the shares issuable under our stock incentive plan.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The market price for our common stock could decline as a result
of sales of a large number of shares of our common stock in the
market after this offering, and even the perception that these
sales could occur may depress the market price. The sale of
shares issued upon the exercise or conversion of our derivative
securities could also further dilute your investment in our
common stock. Further, the sale of any of the foregoing shares
could impair our ability to raise capital through the sale of
additional equity securities.
</DIV>

<P align="center" style="font-size: 11pt;">-19-

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<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We will have broad discretion over the use of proceeds from
this offering and may not apply them effectively or in the
manner currently contemplated.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While we currently expect to use the net proceeds from this
offering for brand development, debt retirement and working
capital and general corporate purposes, we will have broad
discretion to adjust the application and allocation of the net
proceeds should our expectations regarding future sales or cash
flow prove to be inaccurate or our anticipated business needs
change. As a result, we may use the proceeds in a manner
significantly different from our current plans and in ways with
which you do not approve. The success of our operations that are
influenced by capital expenditures and working capital
allocations will substantially depend upon our discretion and
judgment with respect to the application and allocation of the
net proceeds from this offering. The failure of our management
to apply these funds effectively could materially harm our
business and prospects.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We will incur increased costs as a result of being a public
company, which may divert management attention from our business
and impair our financial results.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
In addition, the Sarbanes-Oxley Act of 2002, as well as new
rules subsequently implemented by the Securities and Exchange
Commission and the American Stock Exchange, has required changes
in corporate governance practices of public companies. We expect
these new rules and regulations to increase our legal and
financial compliance costs and to make some activities more
time-consuming and costly. In addition, we will incur additional
costs associated with our public company reporting requirements.
We also expect these new rules and regulations to make it more
difficult and more expensive for us to obtain directors&#146;
and officers&#146; liability insurance, and we may be required
to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to
attract and retain qualified persons to serve on our board of
directors or as executive officers. We are currently evaluating
and monitoring developments with respect to these rules, and we
cannot predict or estimate the amount of additional costs we may
incur or the timing of such costs.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Failure to achieve and maintain effective internal controls
in accordance with Section&nbsp;404 of the Sarbanes-Oxley Act
could have a material adverse effect on our ability to produce
accurate financial statements and on our stock price.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to Section&nbsp;404 of the Sarbanes-Oxley Act of 2002,
we will be required to furnish a report by our management on our
internal control over financial reporting. We have not been
subject to these requirements in the past. The internal control
report must contain (a)&nbsp;a statement of management&#146;s
responsibility for establishing and maintaining adequate
internal control over financial reporting, (b)&nbsp;a statement
identifying the framework used by management to conduct the
required evaluation of the effectiveness of our internal control
over financial reporting, (c)&nbsp;management&#146;s assessment
of the effectiveness of our internal control over financial
reporting as of the end of our most recent fiscal year,
including a statement as to whether or not internal control over
financial reporting is effective, and (d)&nbsp;a statement that
our independent registered public accounting firm has issued an
attestation report on management&#146;s assessment of internal
control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To achieve compliance with Section&nbsp;404 within the
prescribed period, we will be engaged in a process to document
and evaluate our internal control over financial reporting,
which is both costly and challenging. In this regard, we will
need to dedicate internal resources, engage outside consultants
and adopt a detailed work plan to (a)&nbsp;assess and document
the adequacy of internal control over financial reporting,
(b)&nbsp;take steps to improve control processes where
appropriate, (c)&nbsp;validate through testing that controls are
functioning as documented, and (d)&nbsp;implement a continuous
reporting and improvement process for internal control over
financial reporting. Despite our efforts, we can provide no
assurance as to our, or our independent registered public
accounting firm&#146;s, conclusions with respect to the
effectiveness of our internal control over financial reporting
under Section&nbsp;404. There is a risk
</DIV>

<P align="center" style="font-size: 11pt;">-20-

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<DIV align="left" style="font-size: 11pt;">
that neither we nor our independent registered public accounting
firm will be able to conclude within the prescribed timeframe
that our internal controls over financial reporting are
effective as required by Section&nbsp;404. This could result in
an adverse reaction in the financial markets due to a loss of
confidence in the reliability of our financial statements.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Provisions in our amended and restated certificate of
incorporation, our amended and restated bylaws and Delaware law
could make it more difficult for a third party to acquire us,
discourage a takeover and adversely affect existing
stockholders.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our amended and restated certificate of incorporation, our
amended and restated bylaws and the Delaware General Corporation
Law contain provisions that may have the effect of making more
difficult, delaying, or deterring attempts by others to obtain
control of our company, even when these attempts may be in the
best interests of our stockholders. These include provisions
limiting the stockholders&#146; powers to remove directors or
take action by written consent instead of at a
stockholders&#146; meeting. Our amended and restated certificate
of incorporation also authorizes our board of directors, without
stockholder approval, to issue one or more series of preferred
stock, which could have voting and conversion rights that
adversely affect or dilute the voting power of the holders of
our common stock. Delaware law also imposes conditions on the
voting of &#147;control shares&#148; and on certain business
combination transactions with &#147;interested
stockholders.&#148;
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These provisions and others that could be adopted in the future
could deter unsolicited takeovers or delay or prevent changes in
our control or management, including transactions in which
stockholders might otherwise receive a premium for their shares
over then current market prices. These provisions may also limit
the ability of stockholders to approve transactions that they
may deem to be in their best interests.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We do not expect to pay any dividends for the foreseeable
future. Investors in this offering may never obtain a return on
their investment.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should not rely on an investment in our common stock to
provide dividend income. We do not anticipate that we will pay
any dividends to holders of our common stock in the foreseeable
future. Instead, we plan to retain any earnings to maintain and
expand our existing operations, further develop our brands and
finance the acquisition of additional brands. In addition, our
ability to pay dividends is prohibited by the terms of our
6%&nbsp;convertible notes and we expect that any future credit
facility will contain terms prohibiting or limiting the amount
of dividends that may be declared or paid on our common stock.
Accordingly, investors must rely on sales of their common stock
after price appreciation, which may never occur, as the only way
to realize any return on their investment. As a result,
investors seeking cash dividends should not purchase our common
stock.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our determination of the public offering price for our common
stock is arbitrary.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The public offering price for our common stock has been
determined by negotiation between us and the underwriters and
does not necessarily bear any direct relationship to our assets,
results of operations, financial condition, book value or any
other recognized criterion of value and, therefore, might not be
indicative of prices that will prevail in the trading market.
</DIV>

<P align="center" style="font-size: 11pt;">-21-

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<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">FORWARD-LOOKING STATEMENTS</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORWARD-LOOKING STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus contains forward-looking statements. These
statements relate to future <BR>
 events, or our future financial performance. We have attempted
to identify forward-looking statements by terminology including
&#147;anticipates,&#148; &#147;believes,&#148; &#147;can,&#148;
&#147;continue,&#148; &#147;could,&#148; &#147;estimates,&#148;
&#147;expects,&#148; &#147;intends,&#148; &#147;may,&#148;
&#147;plans,&#148; &#147;potential,&#148; &#147;predicts,&#148;
&#147;should,&#148; or &#147;will&#148; or the negative of these
terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties,
and other factors, including those discussed under &#147;Risk
Factors.&#148; The following factors, among others, could cause
our actual results and performance to differ materially from the
results and performance projected in, or implied by, the
forward-looking statements:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our history of losses and expectation of further losses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the effect of poor operating results on our company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the effect of growth on our infrastructure, resources, and
    existing sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our ability to expand our operations in both new and existing
    markets and our ability to develop or acquire new brands;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the impact of supply shortages and alcohol and packaging costs
    in general;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our ability to raise capital;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our ability to fully utilize and retain new executives;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    negative publicity surrounding our products or the consumption
    of beverage alcohol products in general;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our ability to acquire and/or maintain brand recognition and
    acceptance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    trends in consumer tastes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our ability to protect trademarks and other proprietary
    information;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the impact of litigation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the impact of federal, state, local or foreign government
    regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the effect of competition in our industry;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    economic and political conditions generally.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We assume no obligation to publicly update or revise these
forward-looking statements for any reason, or to update the
reasons actual results could differ materially from those
anticipated in, or implied by, these forward-looking statements,
even if new information becomes available in the future.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='106'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">MARKET DATA AND FORECASTS</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MARKET DATA AND FORECASTS</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless otherwise indicated, information in this prospectus
concerning economic conditions and our industry is based on
information from independent industry analysts and publications,
including the IMPACT Databank Review and Forecast, Adams
Handbook, as well as our estimates. Our estimates are derived
from publicly available information released by third-party
sources, as well as data from our internal research, and are
based on such data and our knowledge of our industry, which we
believe to be reasonable. None of the independent industry
publications used in this prospectus was prepared on our or our
affiliates&#146; behalf and none of the sources cited in this
prospectus has consented to the inclusion of any data from its
reports, nor have we sought their consent.
</DIV>

<P align="center" style="font-size: 11pt;">-22-

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<DIV align="left" style="font-size: 10pt;">
<A name='104'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">USE OF PROCEEDS</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>USE OF PROCEEDS</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that our net proceeds from the sale of the
2,500,000&nbsp;shares of our common stock in this offering will
be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
&#147;Net proceeds&#148; is what we expect to receive after
paying the underwriters&#146; discounts and commissions and
other expenses of the offering. For purposes of estimating net
proceeds, we are assuming that the public offering price will be
the midpoint of the estimated initial public offering price
range set forth on the cover page of this prospectus, which is
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to use net proceeds from this offering for general
corporate purposes, including for:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    sales and marketing activities;</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    capital commitments to our Gosling-Castle Partners Inc.
    strategic export venture (of the remaining $3.9&nbsp;million of
    funding that we owe to Gosling-Castle Partners by April 2007, we
    will fund approximately $1.1&nbsp;million in October 2005, an
    additional $1.0&nbsp;million in each of April 2006 and October
    2006 and $750,000 in April 2007), see &#147;Business&nbsp;&#150;
    Strategic brand-partner relationships&#148;;</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    hiring of additional employees;</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    repayment of
    <FONT face="times new roman,times">&#128;</FONT>521,646
    ($629,418) of the principal amount of indebtedness owed by us to
    former stockholders of our Irish subsidiaries; and</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    working capital needs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may also use a portion of the net proceeds of this offering
to invest in or acquire new brands through mergers, stock or
asset purchases, joint ventures, long-term exclusive distributor
arrangements and/or other strategic relationships, although we
have no present commitments or agreements with respect to any
such material acquisition or investment.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, if we receive a commitment for a new credit
facility, we intend to use:
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    approximately $4.6&nbsp;million of the net proceeds of this
    offering to repay the senior notes of Castle Brands (USA) Corp.,
    our wholly owned subsidiary, which are held by 27&nbsp;holders,
    including approximately $2.6&nbsp;million held by six of our
    officers, directors and principal stockholders. This
    indebtedness bears interest at a rate of 9%&nbsp;per annum and
    is due May&nbsp;31, 2009;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    up to approximately $2.0&nbsp;million of the net proceeds of
    this offering to repay the notes and other obligations held by
    Ulster Bank Ireland Limited and Ulster Bank Ltd. under various
    facilities extended to our Irish subsidiaries. This indebtedness
    consists of several facilities which bear interest at various
    rates ranging from 4.8% to 7.8%&nbsp;per annum. Each facility is
    payable on demand by the bank.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amounts actually expended for each of the purposes listed
above (other than the repayment of indebtedness) and the timing
of our actual expenditures will depend on numerous factors,
including growth in our net sales, sales and marketing
activities, the terms of any brand acquisitions, amount of cash
generated or used by our operations and the other factors
described in &#147;Risk Factors.&#148; We have not determined
the amount or timing of expenditures for the corporate purposes
listed above and will retain broad discretion in the allocation
and use of the net proceeds. Pending the uses described above,
we intend to invest the net proceeds in short-term,
interest-bearing, investment-grade securities.
</DIV>

<P align="center" style="font-size: 11pt;">-23-

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='105'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">DIVIDEND POLICY</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIVIDEND POLICY</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have never paid or declared dividends on our capital stock
other than the preferred stock dividends to be paid upon the
consummation of this offering in shares of our common stock. We
do not anticipate that we will pay any dividends to holders of
our common stock in the foreseeable future, as we currently plan
to retain any earnings to maintain and expand our existing
operations, further develop our brands and finance the
acquisition of additional brands. In addition, our ability to
pay dividends is subject to the consent of the holders of our
6%&nbsp;convertible notes and we expect that any future credit
facility will contain terms prohibiting or limiting the amount
of dividends that may be declared or paid on our common stock.
Payments of any cash dividends in the future, however, is within
the discretion of our board of directors and will depend on our
financial condition, results of operations and capital and legal
requirements as well as other factors deemed relevant by our
board of directors.
</DIV>

<P align="center" style="font-size: 11pt;">-24-

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='107'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CAPITALIZATION</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CAPITALIZATION</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Please read the following capitalization table together with the
sections of this prospectus entitled &#147;Selected Consolidated
Financial Data&#148; and &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations&#148;
and our consolidated financial statements and related notes
included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our consolidated cash position
and capitalization as of June&nbsp;30, 2005:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    on an actual, historical basis, without any adjustments to
    reflect subsequent or anticipated events;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    on a &#147;pro forma&#148; basis, with adjustments to reflect
    the following subsequent events:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="5%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our issuances in August 2005 of an additional
    362,500&nbsp;shares of our Series&nbsp;C convertible preferred
    stock and an additional $5.0&nbsp;million principal amount of
    our 6%&nbsp;convertible notes, for aggregate net proceeds to us
    of approximately $7.5&nbsp;million;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our accrual of additional preferred stock dividends on our
    convertible preferred stock from July&nbsp;1, 2005 through the
    estimated closing date of this offering in the aggregate amount
    of $145,246; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our issuance of an additional 5,343,827&nbsp;shares of our
    common stock upon a the conversion of all of our preferred
    stock, including the additional shares of Series&nbsp;C
    convertible preferred stock issued in August 2005, into
    4,089,465&nbsp;shares of common stock, (b)&nbsp;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 June&nbsp;30, 2005, with 133,857&nbsp;shares
    of common stock, and (c)&nbsp;the conversion of
    $7.7&nbsp;million of our indebtedness, including all of our 5%
    euro denominated convertible notes and $6.0&nbsp;million
    principal amount, including $2.0&nbsp;million of the additional
    notes issued in August 2005 for 285,714&nbsp;shares, of our
    6%&nbsp;convertible notes, into an aggregate of
    1,120,505&nbsp;shares of common stock, all of which issuances
    will occur upon the consummation of this offering;&nbsp;and</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    on a &#147;pro forma as adjusted&#148; basis, reflecting the
    foregoing pro forma adjustments as well as the following
    additional events:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="5%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the sale of the 2,500,000&nbsp;shares of common stock offered by
    us in this offering at an assumed public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the midpoint of the range set forth on the cover page of
    this prospectus;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    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 $629,418 of our outstanding
    indebtedness as of June&nbsp;30, 2005.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">-25-

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap>(in thousands, except number of shares)</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Indebtedness:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current, and current maturities of, notes payable:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ulster Bank facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gosling&#146;s Export agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Roaring Water Bay stockholder loans(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term notes payable, less current maturities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    9%&nbsp;senior notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ulster Bank facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    6%&nbsp;convertible subordinated notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gosling&#146;s Export agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    5% euro denominated convertible</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    subordinated notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Roaring Water Bay stockholder loans(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total indebtedness</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Redeemable convertible preferred stock(2):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A convertible preferred stock, $1.00&nbsp;par value,
    550,000&nbsp;shares authorized and 535,715&nbsp;shares issued
    and outstanding (actual); no shares authorized, issued or
    outstanding (pro forma and pro forma as adjusted)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;B convertible preferred stock, $1.00&nbsp;par value,
    200,000&nbsp;shares authorized and 200,000&nbsp;shares issued
    and outstanding (actual); no shares authorized, issued or
    outstanding (pro forma and pro forma as adjusted)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;C convertible preferred stock, $1.00&nbsp;par value,
    3,375,000&nbsp;shares authorized and 2,991,250&nbsp;shares
    issued and outstanding (actual); no shares authorized, issued or
    outstanding (pro forma and pro forma as adjusted)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock dividends payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01&nbsp;par value, 20,500,000&nbsp;shares
    authorized and 3,106,666&nbsp;shares issued and outstanding
    (actual); 20,500,000 shares authorized and 8,450,493 shares
    issued and outstanding (pro forma); and 45,000,000&nbsp;shares
    authorized and 10,950,493&nbsp;shares issued and outstanding
    (pro forma as adjusted)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (deficiency)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(15,084</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>38,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Does not give effect to an aggregate of $50,000 in imputed
    interest ascribed to these non-interest bearing notes.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Amounts shown are net of transaction costs, including the value
    attributed to placement agent warrants.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">-26-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='108'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">DILUTION</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DILUTION</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you invest in our common stock, your interest will be
immediately and substantially diluted to the extent of the
difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share
of our common stock after giving effect to this offering.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our pro forma net tangible book value as of June&nbsp;30, 2005
was approximately $(1.9)&nbsp;million or $(0.23)&nbsp;per share
of common stock after giving effect to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our issuances in August 2005 of an additional $5.0&nbsp;million
    principal amount of our 6%&nbsp;convertible notes and an
    additional 362,500&nbsp;shares of our Series&nbsp;C convertible
    preferred stock, and our receipt of approximately
    $7.5&nbsp;million in aggregate net proceeds therefrom;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    accrual of additional dividends on our preferred stock from July
    1, 2005 through the estimated closing date of this offering in
    the amount of $145,246; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    the conversion in connection with this offering of all of our
    preferred stock, $897,953 of preferred stock dividends accrued
    through the estimated closing of this offering and
    $7.7&nbsp;million principal amount of our indebtedness, into an
    aggregate of 5,343,827&nbsp;shares of our common stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pro forma net tangible book value per share is determined by
dividing net tangible book value, which is our tangible assets
(total assets less intangible assets and goodwill) less total
liabilities, by the pro forma number of shares of common stock
outstanding.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After giving effect to the sale of 2,500,000&nbsp;shares of
common stock in this offering at an assumed initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 estimated underwriting discounts
and commissions and other offering expenses payable by us and
giving effect to our repayment from such proceeds of $629,418 of
the indebtedness outstanding as of June&nbsp;30, 2005, our pro
forma as adjusted net tangible book value as of June&nbsp;30,
2005, would have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. This represents an immediate increase in
the pro forma net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to our existing stockholders and an immediate dilution in
the pro forma as adjusted net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to you and the other investors in this offering.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dilution in pro forma net tangible book value per share
represents the difference between the amount per share paid by
purchasers of our common stock in this offering and the pro
forma net tangible book value per share of our common stock
immediately after this offering.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed initial public offering price per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Pro forma net tangible book value per share as of June&nbsp;30,
    2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Increase in net tangible book value per share attributable to
    this offering</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma as adjusted net tangible book value per share after
    this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dilution in pro forma as adjusted net tangible book value per
    share to investors in this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">-27-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the total consideration, and the
average price per share, paid to us for our common stock by our
existing stockholders, on a pro forma basis as of June&nbsp;30,
2005, and the total consideration, and price per share, to be
paid to us by investors in this offering for the shares offered
in this offering, assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, the midpoint of the range set forth on the cover page of
this prospectus, and before deducting the underwriting discounts
and commissions and other estimated offering expenses:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares purchased</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total consideration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>price per</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>share</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,450,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>58,204,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.89</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investors in this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.8&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,950,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The discussion and tables above exclude the options, warrants
and notes exercisable or convertible into shares of our common
stock that will remain outstanding after we close this offering.
As of September&nbsp;27, 2005, we had outstanding options under
our stock incentive plan exercisable for the purchase of
878,500&nbsp;shares, outstanding non-plan options exercisable
for the purchase of 10,000&nbsp;shares, outstanding warrants
exercisable for the purchase of 598,618&nbsp;shares and
outstanding notes convertible into 1,125,000&nbsp;shares, all of
which will remain outstanding upon the completion of this
offering. All of these securities will be exercisable or
convertible into common stock at a price per share ($7.52 on a
weighted average basis) that is less than the initial public
offering price, resulting in further dilution to you and the
other investors in this offering.
</DIV>

<P align="center" style="font-size: 11pt;">-28-

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='109'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">SELECTED CONSOLIDATED FINANCIAL DATA</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SELECTED CONSOLIDATED FINANCIAL DATA</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following tables set forth selected consolidated financial
data and other data for the periods ended and as of the dates
indicated. The selected consolidated financial data for the
fiscal years ended March&nbsp;31, 2003, 2004 and 2005 have been
derived from our historical audited consolidated financial
statements. The statement of operations data for the fiscal
years ended March&nbsp;31, 2001 and 2002 is unaudited. The
selected consolidated financial data presented as of and for the
three months ended June&nbsp;30, 2004 and 2005 have been derived
from our unaudited interim consolidated financial statements. In
the opinion of our management, our unaudited financial
statements for the fiscal years ended March&nbsp;31, 2001 and
2002 and our interim consolidated financial statements for the
three months ended June&nbsp;30, 2004 and 2005 include all
adjustments, consisting of only normal recurring adjustments,
that we considered necessary for a fair presentation of our
financial position and results of operations as of and for such
unaudited periods. The historical results are not necessarily
indicative of results to be expected for future periods, and
results for the three month period ended June&nbsp;30, 2005 are
not necessarily indicative of results that may be expected for
the entire year ending March&nbsp;31, 2006. You should read the
following selected consolidated financial data and other data in
conjunction with our consolidated financial statements,
including the related notes, and the section entitled
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; included elsewhere in
this prospectus.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, we acquired The Roaring Water Bay Spirits
Group Limited and The Roaring Water Bay Spirits Marketing and
Sales Company Limited, together, with their subsidiaries,
referred to as Roaring Water Bay. The summary financial and
other data presented in the tables below includes the results of
operations of Roaring Water Bay commencing as of the
December&nbsp;1, 2003 closing date of the acquisition. If we
assume, for comparative purposes only, that the acquisition
occurred as of April&nbsp;1, 2003, the beginning of our fiscal
year ended March&nbsp;31, 2004, our unaudited pro&nbsp;forma
results of operations for our fiscal year ended March&nbsp;31,
2004 would have been: sales, net $8.6&nbsp;million; gross profit
$3.5&nbsp;million; net loss $(6.5)&nbsp;million; and net loss
per common share&nbsp;&#150; basic and diluted $(2.92). These
pro forma results are not necessarily indicative, however, of
the results of operations that actually would have resulted had
the acquisition occurred on April&nbsp;1, 2003 or of future
results.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2005, we entered into a distribution agreement with
Gosling&#146;s Export (Bermuda) Limited, referred to as
Gosling&#146;s Export, giving us the exclusive distribution
rights with respect to the Gosling&#146;s rum products in the
United States and, subsequently, in the United Kingdom.
Thereafter, we expanded this relationship in February 2005, when
we purchased a 60% controlling interest in a newly formed entity
now named Gosling-Castle Partners Inc., a strategic venture that
was formed to acquire, through an export agreement with
Gosling&#146;s Export, the global (excluding Bermuda)
distribution rights with respect to the Gosling&#146;s rums,
including an assignment by Gosling&#146;s Export to
Gosling-Castle Partners of its rights under our January 2005
distribution agreement. This export agreement was entered into
with Gosling&#146;s Export in February 2005, prior to our
investment in Gosling-Castle Partners, and became effective on
April&nbsp;1, 2005. The summary financial and other data
presented in the tables below include our sales of
Gosling&#146;s products in the United States and the United
Kingdom under our distribution agreement commencing as of its
January&nbsp;1, 2005 effective date and include the results of
operations of Gosling-Castle Partners commencing as of the
February&nbsp;18, 2005 closing date of our investment in such
entity, with adjustments for minority interest. Gosling-Castle
Partners had no operations prior to its February 2005 formation
and no meaningful operations prior to the April&nbsp;1, 2005
commencement of its export agreement.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The &#147;other data&#148; presented below relates to our case
sales, which are measured based on the industry standard of
nine-liter equivalent cases, an important measure in our
industry that we use to evaluate the effectiveness of our
operational strategies and overall financial performance. We
believe that by providing this information investors can better
assess trends in our business. Net sales per case is total net
sales for the applicable period presented, divided by the total
number of cases sold during
</DIV>

<P align="center" style="font-size: 11pt;">-29-

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt;">
the period. Gross profit per case and selling expense per case
are derived by dividing our gross profit and selling expense,
respectively, for the applicable period presented by the number
of cases sold for such period.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three months ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year ended March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>(unaudited)</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>(unaudited)</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <B>Consolidated statement<BR>
    of operations data </B>(in thousands, except per share data):</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,647</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,138</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other (income)/expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(199</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,659</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,915</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,258</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,155</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,301</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,142</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,016</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(118</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(92</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(182</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(304</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(998</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(466</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(259</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,777</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,007</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,440</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,424</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,605</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,109</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,777</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,007</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,455</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,982</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,820</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,691</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss per common share&nbsp;&#151; basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.60</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.05</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding&nbsp;&#151; basic and
    diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net loss per common share&nbsp;&#151; basic and
    diluted(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$(1.65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.41</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma weighted average common shares outstanding-basic and
    diluted(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,781</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other data </B>(unaudited):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of case sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,628</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales per case</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$207.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>191.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>74.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>74.19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit per case</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$105.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30.53</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expense per case</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$363.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>275.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>154.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>84.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>68.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>91.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53.19</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Assumes the conversion as of April&nbsp;1, 2004 of: all shares
    of preferred stock outstanding as of June&nbsp;30, 2005,
    including 535,715&nbsp;shares of Series&nbsp;A convertible
    preferred stock, 200,000&nbsp;shares of Series&nbsp;B
    convertible preferred stock and 2,991,250&nbsp;shares of
    Series&nbsp;C convertible preferred stock, into an aggregate of
    3,726,965&nbsp;shares of common stock; the accrued and unpaid
    preferred stock dividends of $752,707 outstanding as of
    June&nbsp;30, 2005 into 112,244 shares of common stock; the
    $1.7&nbsp;million principal amount of our 5%&nbsp;euro
    denominated convertible notes outstanding as of June&nbsp;30,
    2005 into 263,362 shares of common stock; and $4.0&nbsp;million
    of the $10.0 million principal amount of our 6% convertible
    notes that was outstanding as of June&nbsp;30, 2005 into 571,429
    shares of common stock; for an aggregate of
    4,674,000&nbsp;shares of common stock.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">-30-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selected balance sheet data</B>
</DIV>

<DIV align="left" style="font-size: 11pt;">
(in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of June&nbsp;30,&nbsp;2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>As of March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as&nbsp;adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>(unaudited)</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(unaudited)</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(unaudited)</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Working capital (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(804</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,588</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (deficiency).</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(543</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,445</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,943</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,084</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The &#147;pro forma&#148; information included in the summary
balance sheet data as of June&nbsp;30, 2005 gives effect at that
date to the following subsequent events:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our issuances in August 2005 of 362,500&nbsp;shares of our
    Series&nbsp;C convertible preferred stock and $5.0&nbsp;million
    principal amount of our 6%&nbsp;convertible notes, for aggregate
    net proceeds to us of approximately $7.5&nbsp;million;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our accrual of additional preferred stock dividends on our
    convertible preferred stock from July&nbsp;1, 2005 through the
    estimated closing date of this offering in the aggregate amount
    of $145,246; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our issuance of an additional 5,343,827 shares of our common
    stock upon the&nbsp;(a) conversion of all of our preferred
    stock, including the additional shares of Series&nbsp;C
    convertible preferred stock issued in August 2005, into
    4,089,465 shares of common stock, (b)&nbsp;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 June&nbsp;30, 2005, with
    133,857 shares of our common stock, and&nbsp;(c) the conversion
    of $7.7&nbsp;million of our indebtedness into 1,120,505 shares
    of our common stock; including $2.0&nbsp;million of the
    additional notes issued in August 2005 for 285,714 shares; all
    of which issuances will occur upon the consummation of this
    offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The &#147;pro forma as adjusted&#148; information as of
June&nbsp;30, 2005 gives effect at that date to the foregoing
pro forma adjustments as well as to the following additional
events:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    our sale of the 2,500,000&nbsp;shares of common stock in this
    offering at an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the midpoint of the range set forth on the cover page of
    this prospectus;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    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 $629,418 of our outstanding indebtedness
    as of June&nbsp;30, 2005.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">-31-
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='110'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>You should read the following discussion and analysis in
conjunction with our financial statements and related notes
contained elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks, uncertainties,
and assumptions. Our actual results may differ materially from
those anticipated in these forward-looking statements as a
result of a variety of factors, including those set forth under
&#147;Risk Factors&#148; and elsewhere in this prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We develop and market premium branded spirits in several growing
market categories, including vodka, rum, Irish whiskey and
liqueurs/cordials, and we distribute these spirits in all 50
U.S.&nbsp;states, in six key European markets and certain other
international markets. Our brands include, among others, Boru
vodka, Gosling&#146;s rums, Knappogue Castle Whiskey and Pallini
Limoncello.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our current growth strategy focuses on: (a)&nbsp;aggressive
brand development to encourage case sale and revenue growth of
our existing portfolio of brands through significant investment
in sales and marketing activities, including advertising,
promotion and direct sales personnel expense; and (b)&nbsp;the
selective addition of complementary premium brands through a
combination of strategic initiatives, including acquisitions,
joint ventures and long-term exclusive distribution arrangements.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Strategic
transactions</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A review and understanding of the components of our historical
growth during the past three fiscal years and for the most
recent interim period should consider the timing of our most
significant strategic transactions, which are also referenced in
our comparative fiscal and interim analyses contained in
&#147;&nbsp;&#150;&nbsp;Results of operations.&#148; These
transactions for our company and our predecessor companies are
outlined below. In addition to the impact of these transactions,
we have had significant growth in our own brands and will
continue to focus on developing those brands.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Boru distribution agreement.</I> During the fiscal year ended
March&nbsp;31, 2002, Great Spirits Company LLC, our predecessor
company, signed an exclusive distribution agreement for the
U.S.&nbsp;distribution of Boru vodka, which added a key spirit
category to our portfolio, expanded our U.S.&nbsp;market
presence and accelerated our growth. This agreement contributed
U.S.&nbsp;sales of Boru vodka in fiscal 2003 and 2004, although,
in the last four months of fiscal 2004, these sales were
included as a component of the overall sales contribution of
Roaring Water Bay, outlined below.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Roaring Water Bay acquisition.</I> On December&nbsp;1, 2003,
we acquired The Roaring Water Bay Spirits Group Limited and its
affiliated companies, referred to as Roaring Water Bay, which
added the Boru vodka, Clontarf Irish whiskey and Brady&#146;s
Irish cream brands to our portfolio. While we were already
selling Boru vodka in the United States pursuant to the 2002
distribution agreement, the acquisition added significant Boru
vodka sales internationally, principally in the Republic of
Ireland and the United Kingdom. This acquisition is reflected in
our financial results for the last four months of our fiscal
year ended March&nbsp;31, 2004 and in all subsequent periods.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pallini Limoncello distribution agreement.</I> On
August&nbsp;17, 2004, we signed an exclusive U.S.&nbsp;marketing
and distribution agreement for Pallini Limoncello. Sales of that
product are reflected in our results for the fiscal year ended
March&nbsp;31, 2005 commencing as of August&nbsp;2005, and in
all subsequent periods.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gosling&#146;s rum distribution agreement.</I> On
January&nbsp;1, 2005, we signed an exclusive
U.S.&nbsp;distribution agreement for Gosling&#146;s rum.
Gosling&#146;s rum sales are reflected in our financial results
for the last three months of the fiscal year ended
March&nbsp;31, 2005 and for subsequent periods.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gosling-Castle Partners export venture.</I> On
February&nbsp;18, 2005, we reached agreement to expand our
Gosling&#146;s relationship by acquiring a 60% interest in a
newly formed global export venture with the Gosling family, now
named Gosling-Castle Partners, Inc., that was previously formed
to acquire, through an export agreement, the exclusive
distribution rights for Gosling&#146;s rums worldwide
</DIV>

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<DIV align="left" style="font-size: 11pt;">
except for the Gosling&#146;s home market of Bermuda, including
an assignment to such venture of the Gosling&#146;s rights under
our January 2005 distribution agreement. This export agreement
became effective on April&nbsp;1, 2005. Because we own 60% of
Gosling-Castle Partners, its financial results are included in
our consolidated financial statements commencing as of our
February 2005 purchase of such interest, with adjustments for
minority interest; however, it had no meaningful operations
prior to the April&nbsp;1, 2005 commencement of the export
agreement.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;Operations overview</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We generate revenue through the sale of our premium spirits to
our network of wholesale distributors or, in control states,
state-owned agencies, which, in turn, distribute our premium
brands to retail outlets. A number of factors affect our overall
level of sales, including the number of cases sold, price per
case, relative contribution by brand and geographic mix. Changes
in any of these factors may have a material impact on our
overall sales. In the United States, our sales price per case
includes excise tax and import duties, which are also reflected
in a corresponding increase in our cost of sales. Most of our
international sales are sold &#147;in bond,&#148; with the
excise taxes paid by our customers upon shipment, thereby
resulting in lower relative revenue as well as a lower relative
cost of sales, although some of our United Kingdom sales are
sold &#147;tax paid,&#148; as in the United States. Our sales
typically peak during our third fiscal quarter (October through
December) in anticipation of, and during, the holiday season.
See &#147;Risk Factors&nbsp;&#150;&nbsp;Our quarterly operating
results have fluctuated in the past and may fluctuate
significantly in the future, rendering sequential
quarter-to-quarter comparisons of our financial results
unreliable as indicators of performance.&#148; The difference
between sales and net sales principally reflects adjustments for
various distributor incentives.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our gross profit margin is determined by the price at which we
are able to sell our products, our ability to control our cost
of sales, the relative mix of our case sales by brand and
geography and the impact of foreign currency fluctuations. Our
gross profit and cost of sales are principally driven by our
cost of procurement, bottling and packaging, which differ by
brand, as well as freight and warehousing costs. We purchase
certain of our products, such as Gosling&#146;s rums and Pallini
Limoncello, as finished products. For other products, we
purchase the components of our products, including the distilled
spirits, bottles and packaging materials, and have arrangements
with third parties for bottling and packaging. Our
U.S.&nbsp;sales typically have a higher absolute gross margin
than in other markets, as sales prices per case are generally
higher in the United States than elsewhere.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling expense principally includes advertising and marketing
expenditures and compensation paid to our marketing and sales
personnel. Our selling expense, as a percentage of sales and per
case, is presently high as compared to our competitors because
of our brand development, level of marketing spend and our
established sales force versus our relatively small base of case
sales and sales levels. We expect the absolute level of selling
expense to continue to increase in the coming years, but we
expect selling expense as a percentage of revenues and on a per
case basis to continue to decline, as our volumes expand and we
leverage our direct sales team over a larger number of brands.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
General and administrative expenses include all corporate and
administrative functions that support our operations. These
expenses consist primarily of administrative payroll, occupancy
and related expenses and professional services. While we expect
these expenses to increase on an absolute basis as our sales
volumes continue to increase, we expect our general and
administrative expenses as a percentage of sales to continue to
decline due to economies of scale.
</DIV>

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<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Financial performance overview</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding our
case sales for fiscal 2003, 2004 and 2005 and the three months
ended June&nbsp;30, 2004 and 2005. The data in the following
table is based on nine-liter equivalent cases, which is a
standard spirits industry metric.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Three months ended</B></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" align="center" nowrap><B>Year ended March&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>June&nbsp;30,</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Case sales</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2005</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cases</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    18,482</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    29,116</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    74,190</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    10,181</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    32,684</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    3,226</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    34,897</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    95,870</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    22,196</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    27,944</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    21,708</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    64,013</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    170,060</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    32,377</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    60,628</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Percentage of Cases</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    85.1%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    45.5%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    43.6%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    31.4%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    53.9%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    14.9&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    54.5&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    56.4&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    68.6&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    46.1&nbsp;&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    100.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    100.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    100.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    100.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    100.0%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Critical accounting policies and estimates</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of consolidated financial statements in
conformity with U.S.&nbsp;generally accepted accounting
principles requires us to make a number of 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. Such estimates and
assumptions affect the reported amounts of sales and expenses
during the reporting period. On an ongoing basis, we will
evaluate these estimates and assumptions based upon historical
experience and various other factors and circumstances. We
believe our estimates and assumptions are reasonable in the
circumstances; however, actual results may differ from these
estimates under different future conditions.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the estimates and assumptions discussed below
are most important to the portrayal of our financial condition
and results of operations, in that they require our most
difficult, subjective or complex judgments and form the basis
for the accounting policies deemed to be most critical to our
operations.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue recognition</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We recognize revenue from product sales when the product is
shipped to a customer (generally upon shipment to a distributor
or to a control state entity), 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. We do not offer a right of return but will accept
returns if we shipped the wrong product or wrong quantity.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade accounts
receivable</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We record 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. We calculate this allowance based on our
history of write-offs, level of past due accounts based on
contractual terms of the receivables and our relationships with
and economic status of our bottlers and customers.
</DIV>

<P align="center" style="font-size: 11pt;">-34-
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<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our inventory, which consists of distilled spirits, packaging
and finished goods, is valued at the lower of cost or market,
using the weighted average cost method. We assess the valuation
of our inventories and reduce the carrying value of those
inventories that are obsolete or in excess of our forecasted
usage to their estimated realizable value. We estimate the net
realizable value of such inventories based on analyses and
assumptions including, but not limited to, historical usage,
future demand and market requirements. Reduction to the carrying
value of inventories are recorded in cost of goods sold.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill and other
intangible assets</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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&nbsp;31, 2004 and 2005, goodwill and other indefinite
lived intangible assets that arose from acquisitions was
$11.3&nbsp;million and $11.8&nbsp;million, respectively. On
April&nbsp;1, 2004, we adopted SFAS&nbsp;No.&nbsp;142,
&#147;Goodwill and Other Intangible Assets.&#148; Under
SFAS&nbsp;No.&nbsp;142, goodwill and other intangible assets
with indefinite lives are not amortized, but instead are tested
for impairment annually, or, if certain circumstances indicate a
possible impairment may exist, in accordance with the provisions
of SFAS&nbsp;No.&nbsp;142.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We evaluate 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&#146;s
goodwill to the book value of the goodwill. The fair value for
the goodwill is determined based on the difference between the
fair values of the reporting units and the net fair values of
the identifiable assets and liabilities of such reporting units.
If the fair value of the goodwill is less than the book value,
the difference is recognized as an impairment.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS&nbsp;No.&nbsp;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&nbsp;No.&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based awards</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We account for stock-based compensation for our employees,
officers and directors using the intrinsic value method
prescribed in Accounting Principles Board Opinion No.&nbsp;25,
&#147;Accounting for Stock Issued to Employees.&#148; Under the
intrinsic value method, compensation costs for stock options, if
any, are measured as the excess of our estimated value of our
stock at the date of grant over the amount an employee must pay
to acquire the stock. This method, which is permitted by
SFAS&nbsp;No.&nbsp;123 &#147;Accounting for Stock Based
Compensation,&#148; has not resulted in employee compensation
costs for stock options. We account for stock-based awards to
non-employees using a fair value method in accordance with
SFAS&nbsp;No.&nbsp;123.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
FASB Statement&nbsp;123 (Revision&nbsp;2004), Share-Based
Payment, was issued in December 2004 and is effective as of the
beginning of the first quarter of the fiscal annual reporting
period that begins after June&nbsp;15, 2005. We will adopt this
new statement beginning April&nbsp;1, 2006. 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.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The pro forma disclosures previously permitted under
FAS&nbsp;123 no longer will be an alternative to financial
statement recognition. The Company is required to adopt
FAS&nbsp;123R beginning April&nbsp;1, 2006. The Company expects
that the adoption of FAS&nbsp;123R will have a material impact
on its
</DIV>

<P align="center" style="font-size: 11pt;">-35-

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<DIV align="left" style="font-size: 11pt;">
consolidated results of operations and earnings per share. The
Company has not yet determined the method of adoption or the
effect of adopting FAS&nbsp;123R, and it has not determined
whether the adoption will result in amounts that are similar to
the current pro forma disclosures required under FAS&nbsp;123.
The Company has also not yet determined the impact of
FAS&nbsp;123R on its compensation policies or plans, if any.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Disclosure of pro forma net loss, as if all stock options were
accounted for at fair value, is required by
SFAS&nbsp;No.&nbsp;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 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 as of
the following dates:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of March 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of June 30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap>(in thousands, except per share data)</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,982</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,820</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,691</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based compensation expense determined under fair value
    method</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(370</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,982</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(13,190</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,691</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted&nbsp;&#150; as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted&nbsp;&#150; pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 4.4%; expected volatility 25%; and
expected life of 7.2 years. The weighted average fair value of
options granted in the fiscal years ended March&nbsp;31, 2004
and 2005 was $2.17 and $2.69, respectively.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of financial
instruments</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS&nbsp;No.&nbsp;107, <I>Disclosures About Fair Value of
Financial Instruments,</I> 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. We believe 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 us.
</DIV>

<P align="center" style="font-size: 11pt;">-36-

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results of operations</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth, for the periods indicated, the
percentage of net sales of certain items in our financial
statements.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three months</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year ended March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other (income)/expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(134.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(127.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(145.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(67.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(142.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(97.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(166.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(69.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(142.8</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(144.7</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(101.6</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(170.4</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(70.9</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Three months ended
    June&nbsp;30, 2005 compared with three months ended
    June&nbsp;30, 2004</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net sales.</I> Net sales increased $2.3&nbsp;million, or
108.0%, to $4.5&nbsp;million in the three months ended
June&nbsp;30, 2005 from $2.2&nbsp;million in the comparable
prior period. Our cases sales, measured in nine-liter case
equivalents, increased 87.3% from 32,377 cases to 60,628 cases
between the periods. This increase primarily reflects the
January 2005 commencement of our U.S. distribution relationship,
and the April 1, 2005 commencement of Gosling-Castle
Partner&#146;s global export agreement, with respect to the
Gosling&#146;s rums; the addition of Pallini Limoncello; and a
continuation of increased case sales within our portfolio. Our
U.S.&nbsp;case sales as a percentage of total case sales
increased from 31.4% to 53.9% between these periods, which
reflected the effects of the Gosling&#146;s rums and Limoncello
agreements, and increased U.S.&nbsp;sales of other brands,
particularly Boru vodka and Clontarf Irish whiskey, which were
introduced into the U.S. market during the later period.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit increased 171.8% to
$1.9&nbsp;million during the three months ended June&nbsp;30,
2005 from $0.7&nbsp;million in the comparable prior period. Our
gross profit as a percent of net sales increased to 41.2% for
the three months ended June&nbsp;30, 2005 compared to 31.5% for
the comparable prior year period. The greater increase in gross
profit, compared to net sales, primarily resulted from the
commencement of our Gosling-Castle Partners venture, which
contributed increased gross profit.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling expense.</I> Selling expense increased 8.3%, to
$3.2&nbsp;million in the three months ended June&nbsp;30, 2005
from $3.0&nbsp;million in the comparable prior period. The
increase in the absolute amount of selling expense in the more
recent period is primarily attributable to Gosling-Castle
Partners, which initiated a significant consumer advertising
campaign. As a percentage of net sales, selling expense
decreased to 71.7%, compared to 137.7% for the comparable prior
period. This decrease is principally due to the leveraging of
our sales force and marketing expenditures across increased
sales volumes. We
</DIV>

<P align="center" style="font-size: 11pt;">-37-
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<DIV align="left" style="font-size: 11pt;">
believe that this general trend should continue over the next
few years, although it may vary from quarter to quarter.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>General and administrative expense.</I> General and
administrative expense increased 43.0% to $1.1&nbsp;million in
the three months ended June&nbsp;30, 2005 from $0.8&nbsp;million
in the comparable prior year period. This increase was primarily
due to the hiring of additional corporate personnel and
increased occupancy expense. As a percentage of net sales,
general and administrative expenses decreased to 25.3% for the
three months ended June&nbsp;30, 2005 compared to 36.8% for the
comparable prior year period, due to economies of scales with
higher sales volumes.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Fiscal year ended
    March&nbsp;31, 2005 compared with fiscal year ended
    March&nbsp;31, 2004</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net sales.</I> Net sales increased $7.8&nbsp;million, or
161.4%, to $12.6&nbsp;million for the fiscal year ended
March&nbsp;31, 2005 from $4.8&nbsp;million for fiscal 2004. Our
equivalent case sales increased 165.6% from 64,013 to 170,060
cases between fiscal 2004 and 2005. This increase particularly
reflects our acquisition of Roaring Water Bay, which had a full
year effect in fiscal 2005 versus four months inclusion in
fiscal 2004. The sales increase was also affected by the
addition of our Pallini Limoncello and Gosling&#146;s rums
distribution agreements, and continued increased organic case
sales of our other brands. For fiscal 2005, case sales in the
United States accounted for 43.6% of total case sales, down
modestly from the prior fiscal year. While we experienced
significant growth in our U.S.&nbsp;sales in fiscal 2005, the
full year impact of Roaring Water Bay also significantly
increased our international sales.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit increased 151.3% to
$3.9&nbsp;million for the fiscal year ended March&nbsp;31, 2005
from $1.5&nbsp;million for fiscal 2004. As a percent of net
sales, gross margins decreased slightly to 30.7% for fiscal 2005
compared to 31.9% in the prior year, which reflected the
acquisition and distribution relationships outlined in net
sales, changes in the brand and geographic mix of our sales and
higher import costs due to a decline in the relative value of
the U.S.&nbsp;dollar.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling expense.</I> Selling expense increased 114.3%, to
$11.6&nbsp;million for the fiscal year ended March&nbsp;31, 2005
from $5.4&nbsp;million for fiscal 2004. This increase was
primarily the result of our increased U.S.&nbsp;advertising
expenditures for Boru vodka, distributor sales incentives and
significant additions of sales personnel in the United States.
As a percent of net sales, selling expense for fiscal 2005
decreased to 91.7% compared to 111.8% in the prior year, based
on increasing economies of scale with higher sales volumes.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>General and administrative expense.</I> General and
administrative expense increased 85.5% to $3.6&nbsp;million for
the fiscal year ended March&nbsp;31, 2005 from $2.0&nbsp;million
for fiscal 2004. This primarily resulted from the full year
impact of the Roaring Water Bay acquisition, an increase in
occupancy expense due to office relocations in New York and
Dublin, and an investment in our administrative and systems
platforms. As a percentage of sales, general and administrative
expense decreased from 40.6% in fiscal 2004 to 28.8% for fiscal
2005 based on leveraging overhead costs with higher sales
volumes.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Fiscal year ended March&nbsp;31, 2004 compared with fiscal
year ended March&nbsp;31, 2003</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net sales.</I> Net sales increased $2.4&nbsp;million, or
99.5%, to $4.8&nbsp;million for the fiscal year ended
March&nbsp;31, 2004 from $2.4&nbsp;million for fiscal 2003. This
increase resulted primarily from the impact of the Roaring Water
Bay acquisition, which was included for four months in fiscal
2004, but not in the prior fiscal year. Our case sales increased
194.9% from 21,708 cases to 64,013 cases between fiscal 2003 and
2004. While U.S. sales increased on an absolute basis from
period to period, as a percentage of total sales, net case sales
in the United States accounted for 45.5% of total case sales in
fiscal 2004, down significantly from 85.1% in fiscal 2003. The
overall increase in sales and case sales principally reflected
the effects of our Roaring Water Bay acquisition and the
decrease in U.S.&nbsp;sales relative to total sales reflected
the significant increase in international sales as a result of
the same acquisition.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit increased 55.5% to
$1.5&nbsp;million for the fiscal year ended March&nbsp;31, 2004
from $1.0&nbsp;million for fiscal 2003. Our gross profit as a
percent of net sales decreased to 31.9%
</DIV>

<P align="center" style="font-size: 11pt;">-38-
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt;">
for fiscal 2004 compared to 41.0% for fiscal 2003. This absolute
increase and percentage decrease were primarily due to the
inclusion of the results of Roaring Water Bay.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling expense.</I> Selling expense increased 61.2%, to
$5.4&nbsp;million for the fiscal year ended March&nbsp;31, 2004
from $3.3&nbsp;million for fiscal 2003. This increase was
primarily the result of our acquisition of Roaring Water Bay and
increased advertising and promotion costs. As a percent of net
sales, selling expense for fiscal 2004 decreased to 111.8%
compared to 138.4% for fiscal 2003, reflecting growth in sales
volumes at a rate that was higher than our sales expense.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>General and administrative expense.</I> General and
administrative expense increased 139.6% to $2.0&nbsp;million for
the fiscal year ended March&nbsp;31, 2004 from $0.8&nbsp;million
for fiscal 2003. As a percentage of sales, general and
administrative expense increased from 33.8% in fiscal 2003 to
40.6% for fiscal 2004. These increases primarily reflected
increased overhead and personnel costs related to our Roaring
Water Bay acquisition.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Potential fluctuations in quarterly results and
seasonality</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
See &#147;Risk Factors&nbsp;&#151; Our quarterly operating
results have fluctuated in the past and may fluctuate
significantly in the future, rendering sequential
quarter-to-quarter comparisons of our financial results
unreliable as indicators of performance.&#148;
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quarterly results of operations</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents unaudited consolidated statements
of operations data for each of the thirteen quarters concluding
with the quarter ended June&nbsp;30, 2005. We believe that all
necessary adjustments have been included to present fairly the
quarterly information when read in conjunction with our annual
financial statements and related notes. The operating results
for any quarter are not necessarily indicative of the results
for any subsequent quarter.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="30" align="center" nowrap><B>Quarter ended</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="30" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated Statement of Operations Data<BR>
     </B>(in thousands, except per share data):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,549</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,081</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,105</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>670</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other (income)/expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(218</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(617</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(662</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(948</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,031</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(948</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,002</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,130</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(40</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(56</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(56</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(97</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(702</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,004</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,087</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,005</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,094</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,192</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>339</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(702</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,004</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,102</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,050</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,220</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,181</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,531</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss per common share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.38</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.38</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.68</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.97</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.38</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.38</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.68</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.97</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares used in computation:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">-39-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Quarter ended</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated Statement of Operations Data<BR>
     </B>(in thousands, except per share data):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,647</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,138</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other (income)/expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(149</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(161</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,127</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,078</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,916</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,016</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(466</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(175</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(196</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(161</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(259</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,591</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,253</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,112</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,338</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,109</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,677</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,340</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,289</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,514</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss per common share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.18</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.07</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.06</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.18</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.07</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.06</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares used in computation:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">-40-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and capital resources</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our primary uses of cash have been for new product development,
selling and marketing expense, employee compensation and working
capital. Our main sources of cash have been from the sale of
common and preferred stock, the sale of convertible and senior
notes and borrowings under bank credit facilities.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our balance of cash and cash equivalents was $5.0&nbsp;million
at June&nbsp;30, 2005 as compared to $5.7&nbsp;million at
March&nbsp;31, 2005. In August 2005, we completed additional
financings, including the placement of $5.0&nbsp;million of
additional 6%&nbsp;convertible notes and the sale of $2.9
million of additional Series&nbsp;C convertible preferred stock
for aggregate net proceeds of $7.5 million.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes our primary sources and uses of
cash during the periods presented (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three months</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year ended March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net cash provided by (used in):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;Operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,833</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5,373</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(13,198</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,474</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,524</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;Investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,723</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(598</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;Financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,973</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(633</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Operating activities.</I></B> A substantial portion of our
available cash has been used to fund our operating activities.
In general, these cash funding requirements are based on
operating losses, driven chiefly by our sizable allocations to
selling and marketing expense. With increases in our overall
sales volumes, we have also utilized cash to fund our
receivables and inventories. In general, these increases are
only partially offset by increases in our accounts payable to
our suppliers and accrued expenses. Our business has incurred
significant losses since inception.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On average, the production cycle for our owned brands can take
as long as three months from the time we obtain the distilled
spirits and other materials needed to bottle and package our
products to the time we receive products available for sale,
which is impacted by the international nature of our business.
With respect to Gosling&#146;s rums and Pallini Limoncello, we
do not produce the finished product and, instead, receive the
finished product directly from the owners of such brands. From
the time we have products available for sale, an additional
three to four months may be required before we sell our
inventory and collect payment from our customers.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the three months ended June&nbsp;30, 2005, net cash used in
operating activities was $4.5&nbsp;million, consisting primarily
of losses from our operations of $3.1&nbsp;million, a
$1.0&nbsp;million increase in accounts receivable and a
$0.5&nbsp;million reduction in accounts payable and accrued
expenses. In the three months ended June&nbsp;30, 2004, net cash
used in operating activities was $2.5&nbsp;million, consisting
primarily of losses from our operations of $3.6&nbsp;million,
which was offset by a $1.3&nbsp;million increase in accounts
payable and accrued expenses.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash from operations used in the fiscal year ended
March&nbsp;31, 2005 was $13.2&nbsp;million, consisting primarily
of losses from operations of $12.3&nbsp;million, an increase in
accounts receivable of $1.8&nbsp;million, an increase in
inventory of $1.6&nbsp;million and an increase in other assets
of $0.9&nbsp;million, partially offset by an increase in
accounts payable and accrued expenses of $1.7&nbsp;million. Net
cash from
</DIV>

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<DIV align="left" style="font-size: 11pt;">
operations used in the fiscal year ended March&nbsp;31, 2004 was
$5.4&nbsp;million and was attributable to our operating losses
of $6.4&nbsp;million and a decrease of $0.3&nbsp;million in our
accounts payable and accrued expenses. Net cash used in the
fiscal year ended March&nbsp;31, 2003 was $3.8&nbsp;million,
consisting primarily of losses from operations of
$3.4&nbsp;million and an increase of $0.4&nbsp;million in
inventory.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Investing activities.</I></B> Since April 1, 2002, the
single largest use of cash in investing activities was
$6.7&nbsp;million in the year ending March&nbsp;31, 2004, which
was used as a part of the $17.0&nbsp;million total consideration
used to acquire the controlling interest of Roaring Water Bay,
with a subsequent purchase of minority interest for $0.4 million.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Financing activities.</I></B> During the three years
ending March&nbsp;31, 2005, in order to fund the above operating
and investing activities, our total net cash from financing
activities was approximately $35.0&nbsp;million, which came
primarily from our issuances of convertible preferred stock,
senior notes and convertible subordinated debt.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities during the three
months ended June&nbsp;30, 2005 was $4.0&nbsp;million and
consisted primarily of funds raised from the second tranche of
our 6%&nbsp;convertible note financing. A portion of these funds
was used during that period to fund our initial capital
investment of $1.1&nbsp;million in Gosling-Castle Partners.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon consummation of this offering, we believe that we will be
able to fund our operations from the proceeds of this offering,
our projected cash flow from operations and current cash and
cash equivalents for at least twelve months succeeding the
closing of this offering. Beyond that, additional financing may
be needed to fund working capital and other requirements.
Changes in our operating plans, acquisitions or other additions
of brands, lower than anticipated sales, increased expenses, or
other events, including those described in &#147;Risk
Factors,&#148; may require us to seek additional debt or equity
financing on an accelerated basis. Financing may not be
available on acceptable terms, or at all, and our failure to
raise capital when needed could impact negatively our growth
plans, financial condition and results of operations. Additional
equity financing may be dilutive to the holders of our common
stock, and debt financing, if available, may involve significant
cash payment obligations or financial covenants and ratios that
restrict our ability to operate our business.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Obligations
    and commitments</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are in preliminary discussions relating to the establishment
of a credit line with one or more financial institutions. If
such a facility is established, we intend to retire our current
secured credit facilities and repay our 9% senior notes and may
do so without penalty.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit
    facilities</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have credit facilities with availability aggregating
approximately
<FONT face="times new roman,times">&#128;</FONT>1.7&nbsp;million
($2.1&nbsp;million) with two affiliated Irish banks, including
overdraft, customs and excise guaranty, forward currency
dealing, revolving credit and accounts receivable facilities.
These facilities, which are payable on demand and renew annually
and have interest rates ranging from prime plus&nbsp;3% to
7.85%. We also arranged revolving credit facilities aggregating
approximately &#163;242,000 ($436,762) with the same lender for
working capital purposes. These other banking facilities are
also payable on demand and renew annually subject to certain
provisions, have interest rates ranging from prime plus&nbsp;2%
to prime plus&nbsp;2.25%. We also secured
a&nbsp;<FONT face="times new roman,times">&#128;</FONT>295,000
($355,947) term note with the same lender. We have deposited
<FONT face="times new roman,times">&#128;</FONT>300,000 with the
banks to secure these borrowings. The term note carries an
interest rate of 5.2% and calls for monthly payments of
principal and interest
of&nbsp;<FONT face="times new roman,times">&#128;</FONT>6,377
through 2006.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2004, we established a revolving credit
facility with an Irish bank of which the outstanding balance was
repaid, together with a loan termination fee of $60,000 and
accrued interest and fees of $4,176. This line of credit was
terminated simultaneously with the issuance of the senior notes
in June&nbsp;2004.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>9% Senior notes.</I></B> On June&nbsp;9, September 28 and
October&nbsp;13, 2004, our wholly owned subsidiary Castle Brands
(USA),&nbsp;issued to 27&nbsp;individuals $4.6&nbsp;million of
senior notes secured by
</DIV>

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<DIV align="left" style="font-size: 11pt;">
accounts receivable and inventories of Castle Brands (USA). As
issued, these senior notes bore an interest rate of 8%, payable
semi-annually on November&nbsp;30th and May&nbsp;31st, and were
to mature on May&nbsp;31, 2007. The senior notes are guaranteed
as to payment by us. Effective August&nbsp;15, 2005, the terms
of these notes were modified with the consent of the note
holders to mature on May&nbsp;31, 2009 in exchange for an
interest rate adjustment to 9%.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, these notes were accompanied by warrants to
purchase&nbsp;25&nbsp;shares of our common stock at $8.00 a
share for every $1,000 principal amount of such notes for an
aggregate of 116,500&nbsp;shares.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior notes are subject to customary restrictive covenants.
In addition, the consent of holders of a requisite majority of
the aggregate principal amount of these notes is required for
Castle Brands (USA) to take any of the following actions: merge
or consolidate or sell all or substantially all of its assets
other than with an entity formed in the United States or to a
person or entity that assumes all of our obligations under the
senior notes, engage in a transaction with an affiliate unless
the transaction is on fair and reasonable terms, or change our
jurisdiction of incorporation without giving 60&nbsp;days prior
notice.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we or Castle Brands (USA) were to default on the payment of
principal or interest on our senior notes and the default
continues for 20&nbsp;business days, breach any representation,
warranty or certification made in the senior note documents,
default in the performance of the material obligations under the
senior note documents, which default is unremedied for a period
of 60&nbsp;days after we receive notice of such default, enter
into any arrangement for the benefit of creditors or otherwise
wind-up or dissolve, then the holders of our senior notes could
declare all principal and interest to be immediately payable.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>6%&nbsp;subordinated convertible notes.</I></B> On
March&nbsp;1, 2005, we entered into a convertible note purchase
agreement for up to $10.0&nbsp;million, with the principal
amount convertible, at the option of the holder, at a conversion
price of $8.00 per share. The convertible note agreement was
amended on August&nbsp;16, 2005 to (a) increase the amount of
loans under such agreement to $15.0&nbsp;million and (b) provide
for 40% of the outstanding principal amount of the notes to
convert automatically into common stock upon an initial public
offering of our common stock at a conversion price of $7.00 per
share. Currently, there are three 6%&nbsp;convertible promissory
notes outstanding for $5.0&nbsp;million each. These notes were
issued on March&nbsp;1, 2005, June&nbsp;27, 2005 and
August&nbsp;16, 2005 and mature on March&nbsp;1, 2010. They bear
interest at the rate of 6%&nbsp;per annum, payable quarterly, at
our option for a period of two years from the date of the note,
in cash or in additional notes bearing an interest rate of
7.5%&nbsp;per annum. We may not prepay our 6%&nbsp;convertible
notes without the consent of the holders.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with the amended terms, $6.0&nbsp;million of our
6%&nbsp;convertible notes will automatically convert into shares
of our common stock at a price of $7.00&nbsp;per share upon an
initial public offering of our common stock. The outstanding
balance of our 6%&nbsp;convertible notes may be converted into
common stock at any time at the option of the holders at a
conversion rate of $8.00&nbsp;per share and will automatically
convert at such time as the closing price of our common stock is
$20.00&nbsp;per share or more for thirty consecutive days at any
time after March&nbsp;1, 2008. The 6%&nbsp;convertible notes are
unsecured.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These 6%&nbsp;convertible notes are subject to a number of
customary restrictive covenants and certain potential limits on
future indebtedness, excluding qualified brand acquisition
indebtedness, and which are impacted by our aggregate equity
market capitalization. As long as there is at least
$1.5&nbsp;million aggregate principal amount outstanding under
these notes: (a)&nbsp;the approval of holders of at least a
majority of the aggregate principal amount of the
6%&nbsp;convertible notes outstanding is required before we may
pay dividends or make a distribution or payment on our equity
securities or redeem or repurchase our equity securities (other
than repurchases from employees upon termination of their
employment) and (b)&nbsp;the approval of holders of at least 70%
of the aggregate principal amount of the 6%&nbsp;convertible
notes outstanding is required before we may engage in a
transaction with an affiliate or incur indebtedness in excess of
$30.0&nbsp;million; provided, however, that the indebtedness
covenant will no
</DIV>

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<DIV align="left" style="font-size: 11pt;">
longer be applicable if the product of our fully diluted
securities multiplied by the average of the highest bid and
lowest asked prices on the exchange or over-the-counter
quotation system on which our common stock is listed is at least
$100.0&nbsp;million for a period of at least 90&nbsp;days. The
limit on indebtedness does not include indebtedness that is
incurred in connection with the acquisition of a brand related
to, or an entity doing business in or related to, the beverage
alcohol market, to the extent such indebtedness (including costs
and fees associated with incurring such debt) does not exceed an
amount equal to three times the target&#146;s earnings before
interest, taxes, depreciation and amortization.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we were to default on the payment of principal or interest on
our 6%&nbsp;convertible notes, fail to pay any other debt for
borrowed money in excess of $250,000 when it is due and payable,
fail to perform the affirmative covenants contained in the
convertible note purchase agreement, and fail to cure such
failure within 10 business days or fail to perform, keep or
observe any material term, provision, covenant or agreement
contained in the convertible note purchase agreement or any of
the notes issued under the agreement and fail to cure within
20&nbsp;days, then the holders of our 6%&nbsp;convertible notes
could declare all principal and interest to be immediately
payable.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the consummation of this offering, $6.0&nbsp;million
principal amount of our 6% convertible notes will automatically
convert into 857,143 shares of our common stock.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Gosling&#146;s export venture.</I></B> On
February&nbsp;18, 2005, in connection with our investment in the
Gosling-Castle Partners Inc. strategic export venture with the
Gosling&#146;s family, we issued a promissory note to
Gosling-Castle Partners (now our 60% owned subsidiary) in the
amount of $4.9&nbsp;million. This promissory note is due in
installments as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">$1,025,000 was due April&nbsp;1,
    2005 and was paid;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">$1,125,000 is due October&nbsp;1,
    2005;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">$1,000,000 is due April&nbsp;1,
    2006;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">$1,000,000 is due October&nbsp;1,
    2006; and
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">$750,000 is due April&nbsp;1, 2007.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This note bears interest at the rate of 4%&nbsp;per annum
beginning October&nbsp;1, 2005. There are no restrictive
covenants.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Gosling-Castle Partners&#146; exclusive export agreement
with Gosling&#146;s Export (Bermuda) Limited, Gosling-Castle
Partners is required to pay $2.5&nbsp;million to Gosling&#146;s
Export (Bermuda) Limited in exchange for the distribution rights
set forth in such agreement in four equal installments on
April&nbsp;1, 2005, October&nbsp;1, 2005, April&nbsp;1, 2006 and
October&nbsp;1, 2006. As of June&nbsp;30, 2005, Gosling-Castle
Partners has remaining aggregate payments of approximately
$1.9&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>5% Euro denominated convertible subordinated
notes.</I></B> In connection with the acquisition of Roaring
Water Bay on December&nbsp;1, 2003, we issued an aggregate
principal amount
of&nbsp;<FONT face="times new roman,times">&#128;</FONT>1,374,750
(recorded as $1,658,773 in our convertible financial statements
as of June&nbsp;30, 2005) of our 5% euro denominated convertible
subordinated notes due December&nbsp;1, 2006. These notes bear
interest at the rate of 5%&nbsp;per annum and are convertible
into shares of our common stock at a conversion price of
<FONT face="times new roman,times">&#128;</FONT>5.22&nbsp;per
share.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These 5% euro denominated convertible subordinated notes are
subject to customary restrictive covenants. In addition, the
consent of holders of a majority of the aggregate principal
amount of these notes was required for, and obtained by, us to
file the registration statement of which this prospectus forms a
part.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we were to default on the payment of principal or interest on
our 5% euro denominated convertible subordinated notes and such
default were to continue for 30&nbsp;days after we receive
notice of such default, fail to pay any other debt for borrowed
money in excess of $250,000 when it is due and payable and such
default continues for 30&nbsp;days after we receive notice of
such default, fail to comply with any agreements contained in
such note and such failure continues for 30&nbsp;days after we
receive
</DIV>

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<DIV align="left" style="font-size: 11pt;">
notice or we enter into any arrangement for the benefit of
creditors or otherwise wind-up, dissolve or commence a
bankruptcy proceeding, then the holders of our 5% euro
denominated convertible subordinated notes could declare all
principal and interest to be immediately payable.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the consummation of this offering, all of our 5% euro
denominated convertible subordinated notes will automatically
convert into 263,492&nbsp;shares of our common stock, and all of
the interest accrued on these notes through the closing date of
this offering will be paid out of the proceeds of this offering.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The Roaring Water Bay related notes.</I></B> In December
2003, in connection with our acquisition of Roaring Water Bay,
we issued to the stockholders of Roaring Water Bay subordinated
notes in the principal amount of
<FONT face="times new roman,times">&#128;</FONT>444,389
($536,200). These notes are non-interest bearing and the
principal is due in installments of
<FONT face="times new roman,times">&#128;</FONT>177,743,
<FONT face="times new roman,times">&#128;</FONT>133,323
and&nbsp;<FONT face="times new roman,times">&#128;</FONT>133,323
on December&nbsp;1, 2004, 2005 and 2006, respectively. A total
of&nbsp;<FONT face="times new roman,times">&#128;</FONT>177,743
of the principal amount of these notes has been repaid.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we were to default on the payment of principal on our
non-interest bearing notes and such default continues for
25&nbsp;days after we receive notice of such default, then the
holders of the non-interest bearing notes could declare all
principal to be immediately payable.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the acquisition, we also issued
5.7%&nbsp;subordinated notes due July&nbsp;11, 2007, in the
principal amount
of&nbsp;<FONT face="times new roman,times">&#128;</FONT>255,000
($307,683) in exchange for the elimination of certain common
share rights of the Roaring Water Bay stockholders. These notes
accrue interest at a rate of 5.7%&nbsp;per annum with the
aggregate interest payable being limited to
<FONT face="times new roman,times">&#128;</FONT>51,000. The
total principal and interest on the notes are due at maturity.
These notes do not contain any restrictive covenants.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we were to default on the payment of principal or interest on
our 5.7%&nbsp;subordinated notes and such default continues for
30&nbsp;days after we receive notice of the default, the holders
of our 5.7%&nbsp;convertible notes could declare all principal
and interest due at any time after 90&nbsp;days from the
default. If, among other things, any meeting of our creditors is
held or we make any arrangement for the benefit of creditors or
we otherwise wind-up or dissolve, fail to pay any other material
indebtedness when due, or undertake to sell all or substantially
all of our assets, then the holders of our 5.7%&nbsp;convertible
notes could declare all principal and interest to be immediately
payable.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to use approximately $629,418 from the proceeds of
this offering to prepay all of the remaining principal balance
outstanding under both these non-interest bearing notes and the
5.7% subordinated notes. We will also pay from such proceeds all
accrued and unpaid interest on these notes through the closing
date of this offering.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Office equipment leases.</I></B> We financed the purchase
of certain office equipment totaling $17,821. The equipment
leases call for monthly payments of principal and interest at
the rate of 5%&nbsp;per annum, to be paid through
July&nbsp;2009. As of March&nbsp;31, 2005, we owed $15,998 under
this lease.
</DIV>

<P align="center" style="font-size: 11pt;">-45-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Future commitments of notes and capital lease.</I></B>
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&nbsp;31,
2005):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B>For the years ending</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B>March&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(in&nbsp;thousands)</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,032</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>341</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,662</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,290</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,032</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,258</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Convertible preferred stock.</I></B> Pursuant to a series
of private offerings, we have issued and currently have
outstanding 535,715 shares of our Series&nbsp;A convertible
preferred stock, 200,000 shares of our Series&nbsp;B convertible
preferred stock and 3,353,750 shares of our Series&nbsp;C
convertible preferred stock, for which we obtained gross
proceeds of $31.8&nbsp;million, including $10.4&nbsp;million
since March&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders of our Series&nbsp;A preferred stock and Series&nbsp;B
preferred stock are entitled to cumulative dividends beginning
on December&nbsp;1, 2003, at a current rate of 7.0%&nbsp;per
annum. Holders of our Series&nbsp;C preferred stock are entitled
to cumulative dividends beginning on December&nbsp;1, 2005 at a
rate of 4.0%&nbsp;per annum.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are required to redeem 20% of our Series&nbsp;A preferred
stock, Series&nbsp;B preferred stock and Series&nbsp;C preferred
stock at the original issue price, plus all accrued and unpaid
dividends, if any, on February&nbsp;20, 2009 and each
February&nbsp;20 thereafter with respect to our Series&nbsp;A
preferred stock and Series&nbsp;B preferred stock and
December&nbsp;1, 2009 and each December&nbsp;1 thereafter with
respect to our Series&nbsp;C preferred stock.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of our Series&nbsp;A preferred stock, Series&nbsp;B
preferred stock and Series&nbsp;C preferred stock will
automatically convert into an aggregate of 4,089,465 shares of
our common stock, and all of the dividends accrued on our
preferred stock through the closing date of this offering will
be converted into shares of our common stock, upon the
consummation of this offering (an estimated 133,857 additional
shares based on estimated dividends of $897,953 through the
closing date).
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Contractual obligations</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our contractual commitments as of
March&nbsp;31, 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>Payments due by year</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2010</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Thereafter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap>(in thousands)</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term notes payable, including current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,290</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    Stockholder notes payable</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>344</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,047</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">-46-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Impact of inflation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that our results of operations are not materially
impacted by moderate changes in the inflation rate. Inflation
and changing prices did not have a material impact on our
operations during fiscal 2003, 2004 or 2005. Severe increases in
inflation, however, could affect the global and
U.S.&nbsp;economies and could have an adverse impact on our
business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quantitative and qualitative disclosures about market risk</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June&nbsp;30, 2005, we did not participate in any
derivative financial instruments, or other financial or
commodity instruments for which fair value disclosure would be
required under SFAS&nbsp;No.&nbsp;107, &#147;Disclosure About
Fair Value of Financial Investments.&#148; We hold no investment
securities that would require disclosure of market risk.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do participate in certain foreign exchange currency future
contracts programs to limit our risk and the potential impact of
currency fluctuations on our product costs. When placing a
product order, we attempt to lock in its cost by buying forward
contracts on euros coinciding with the projected payment dates
for such purchases. Individual forward contracts rarely extend
for more than six months or
exceed&nbsp;<FONT face="times new roman,times">&#128;</FONT>300,000
($361,980). Total forward contracts outstanding do not exceed
<FONT face="times new roman,times">&#128;</FONT>1,250,000
($1,508,250). Depending upon the term of the contract, the cost
of these transactions can vary between approximately 50&nbsp;to
100&nbsp;basis points.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Changes in and disagreements with accountants on accounting
and financial disclosure</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;28, 2004, the audit committee of our board of
directors and our entire board of directors approved the
engagement of Eisner&nbsp;LLP to audit our financial statements
for the fiscal years ended March&nbsp;31, 2003, 2004 and 2005,
replacing Grodsky Caporrino&nbsp;&#38; Kaufman, PC as our
principal accountants effective September&nbsp;28, 2004. Grodsky
Caporrino&nbsp;&#38; Kaufman, PC was replaced in order to engage
accountants authorized to practice before the Securities and
Exchange Commission.
</DIV>

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Grodsky Caporrino&nbsp;&#38; Kaufman&#146;s reports on our
financial statements for the years ended December&nbsp;31, 2002
and 2003 did not contain an adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During those two years,
there were no disagreements with Grodsky Caporrino&nbsp;&#38;
Kaufman on any matter of accounting principle or practice,
financial statement disclosure or auditing scope or procedure,
which, if not resolved to Grodsky Caporrino&nbsp;&#38;
Kaufman&#146;s satisfaction, would have caused Grodsky
Caporrino&nbsp;&#38; Kaufman to make reference to the subject
matter of the disagreement in connection with its report on our
consolidated financial statements for such years.
</DIV>

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During the fiscal years ended March&nbsp;31, 2003 and 2004 and
through September&nbsp;28, 2004, we have not consulted with
Eisner LLP with respect to any of the matters or reportable
events set forth in Item&nbsp;304(a)(2)(i) and (ii)&nbsp;of
Regulation&nbsp;S-K.
</DIV>

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<B>BUSINESS</B>
</DIV>

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<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are an emerging developer and global marketer of premium
branded spirits within four growing categories of the spirits
industry: vodka, rum, Irish whiskey and liqueurs/cordials. Since
our formation in 1998, we have invested over $60&nbsp;million in
capital to develop our operating platform, acquire and grow our
branded portfolio of distinctive premium spirits and establish
U.S. and international sales and distribution. Our premium
spirits brands include, among others, Boru vodka, Gosling&#146;s
rum, Knappogue Castle Whiskey and Pallini Limoncello.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For our fiscal year ended March&nbsp;31, 2005 and the three
months ended June&nbsp;30, 2005, we recorded sales of
approximately 170,000&nbsp;cases and 61,000&nbsp;cases,
respectively, which are measured based on the industry standard
of nine-liter equivalent cases, and revenues of approximately
$12.6&nbsp;million and $4.5&nbsp;million, which represented
increases of 161% and 108% from revenues recorded for the prior
comparable fiscal periods. These increases reflect both organic
growth and growth from additions to our brand portfolio. We
intend to continue our current growth through further market
penetration of our brands, as well as through strategic
relationships and acquisitions of both established and emerging
spirits brands with global growth potential.
</DIV>

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<B>Background</B>
</DIV>

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    <B><I><FONT style="font-size: 11pt">Predecessor
    operations</FONT></I></B></TD>
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We were formed in July 2003, as a Delaware corporation, by our
predecessor company, Great Spirits Company LLC, a Delaware
limited liability company. Great Spirits Company was formed in
February 1998 by our chief executive officer, Mark Andrews,
through one of his affiliated entities, Knappogue Corp.
Mr.&nbsp;Andrews originally formed Great Spirits Company for the
purpose of importing and selling the Knappogue Castle 1951 Irish
whiskey developed by his father, and he contributed 2,000
bottles of this whiskey to Great Spirits Company in connection
with its formation.
</DIV>

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During its first year of operations, Great Spirits Company:
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    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.&nbsp;Department of the Treasury;</TD>
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    <TD>&#149;&nbsp;</TD>
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    engaged MHW Ltd. to act as importer of record for it in the
    United States;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
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    created our premium Knappogue Castle single malt Irish whiskey
    to complement Knappogue Castle 1951 and entered into various
    agreements with respect to its production;</TD>
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    <TD>&#149;&nbsp;</TD>
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    established bottling arrangements with Terra Limited, which
    continues to act as one of our primary bottlers today;</TD>
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    <TD>&#149;&nbsp;</TD>
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    hired our first sales manager;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
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    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</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
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    raised $2.0&nbsp;million of private equity financing, including
    $1.8&nbsp;million of the approximately $7.2&nbsp;million that
    has been invested in our company by Mr.&nbsp;Andrews and his
    affiliates as of the date of this prospectus.</TD>
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During 1998, Great Spirits Company also entered into a strategic
venture with Gaelic Heritage Corporation Limited, an affiliate
of Terra, pursuant to which we obtained the exclusive
distribution rights with respect to, and a 60% ownership
interest in, Celtic Crossing, a premium brand of Irish liqueur,
in the United States, Canada, Mexico, Puerto Rico and the
islands between North and South America. As part of this
strategic venture arrangement, Gaelic Heritage retained the
exclusive rights to produce and supply us with Celtic Crossing.
See &#147;&#151;Strategic brand-partner relationship.&#148;
</DIV>

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Thereafter, prior to our formation in July 2003, Great Spirits
Company introduced our award winning Sea Wynde rum to the
market, entered into an exclusive distribution agreement with
The Roaring Water Bay Spirits Group Limited to distribute Boru
vodka in the United States and obtained an additional
$13.0&nbsp;million of private equity financing.
</DIV>

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    <B><I><FONT style="font-size: 11pt">Our formation and the
    acquisition of the Roaring Water Bay entities</FONT></I></B></TD>
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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In early 2003, Great Spirits Company entered into negotiations
with The Roaring Water Bay Spirits Group Limited to acquire the
Boru vodka brand and, in July 2003, we were formed as a holding
company to effectuate the merger of Great Spirits Company and
the Roaring Water Bay entities. This merger was accomplished on
December&nbsp;1, 2003, with the simultaneous (a)&nbsp;merger of
Great Spirits Company into a wholly owned subsidiary established
by us for such purpose, now known as Castle Brands
(USA)&nbsp;Corp., and (b)&nbsp;acquisition by us of The Roaring
Water Bay Spirits Group Limited and its affiliated companies,
referred to by us as Roaring Water Bay, making them our wholly
owned Irish subsidiaries, now known as Castle Brands Spirits
Group Limited and Castle Brands Spirits Marketing and Sales
Company Limited. As a result of this acquisition, we acquired
ownership of Boru vodka, which is now our leading brand, and
also added the Clontarf family of Irish whiskeys and
Brady&#146;s Irish cream to our brand portfolio. During the
merger process, we raised approximately $21.7&nbsp;million of
additional private equity financing.
</DIV>

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    <TD>
    <B><I><FONT style="font-size: 11pt">Recent
    developments</FONT></I></B></TD>
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Subsequent to our formation and acquisition of Roaring Water
Bay, we have obtained approximately $34.0&nbsp;million of
additional private equity and convertible debt financing,
increased our global sales staff to 28 people, including six
regional U.S.&nbsp;sales managers and two foreign sales
managers, and established an extensive distribution network
throughout the United States, as well as a growing distribution
network in the European market and elsewhere. We have also
recently added two additional and significant brands to our
portfolio, as discussed below:
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    <TD>&#149;&nbsp;</TD>
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    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.&nbsp;distribution rights (excluding duty free
    sales) with respect to its Pallini Limoncello, a premium Italian
    liqueur, and related brand extensions;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
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    in January 2005, we became the exclusive U.S.&nbsp;distributor
    for Gosling&#146;s rums, including Gosling&#146;s Black Seal
    dark rum and related brands, all of which are produced by the
    Gosling family in Bermuda, where Gosling&#146;s rums have been
    under continuous production for over 150&nbsp;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;&nbsp;and</TD>
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    <TD>&#149;&nbsp;</TD>
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    effective April&nbsp;1, 2005, Gosling-Castle Partners secured
    the exclusive long-term export and distribution rights for the
    Gosling&#146;s rum products for all countries other than
    Bermuda, including an assignment of the Gosling&#146;s rights
    under our January 2005 distribution agreement with them. See
    &#147;&#151;Strategic brand-partner relationships.&#148;</TD>
</TR>

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our recent brand additions, together with those we acquired from
Roaring Water Bay and from our merger with Great Spirits
Company, have provided us with a strong base from which we can
continue expanding our portfolio and market presence. In
addition, we believe they have helped foster our reputation as a
strategic partner for smaller companies with established and
emerging spirits brands seeking increased brand recognition and
global expansion.
</DIV>

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<B>Our brands</B>
</DIV>

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We market our premium spirits brands in the following distilled
spirit categories: vodka, rum, Irish whiskey and
liqueurs/cordials.
</DIV>

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<B><I>Boru vodka.</I></B> Boru vodka is our leading brand and
accounted for approximately 63% and 52% of our sales for the
fiscal year ended March&nbsp;31, 2005 and the three months ended
June&nbsp;30, 2005. We expect Boru to also represent a
significant portion of our growth over the next several years.
</DIV>

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Boru vodka was the first, and continues to be the largest
selling, premium vodka produced in Ireland. It was developed in
1998 and named after the first High King of Ireland, an Irish
national hero known for uniting the Irish clans and driving
foreign invaders out of Ireland in 1014&nbsp;A.D. The Boru brand
is meant to reflect the strength, power and purity of spirit
associated with the image of this King Brian Boru. It is
quadruple distilled using pure spring water for smoothness and
filtered through ten feet of charcoal made from Irish oak for
increased purity. In addition, flavor extensions are and will
remain an important source of growth for us, and we have three
flavor extensions of Boru vodka: Boru Citrus, Boru Orange and
Boru Crazzberry (a cranberry/raspberry flavor fusion).
</DIV>

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<B><I>Gosling&#146;s rum.</I></B> Gosling&#146;s rums are
distilled in Bermuda where the Gosling brand has a distinguished
heritage, having been under continual ownership by the Gosling
family for over 150&nbsp;years. The Gosling&#146;s rum brands
are internationally known, particularly with consumers who have
traveled to Bermuda.
</DIV>

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Gosling&#146;s offers three distinct premium rums:
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    <B><I>Gosling&#146;s Black Seal</I></B>&nbsp;&#150;
    Gosling&#146;s Black Seal is a premium dark rum, which is best
    known as an ingredient in the Gosling&#146;s trademarked
    cocktail Dark &#145;n Stormy&nbsp;&#150; known as the
    &#147;national drink of Bermuda.&#148; To foster the promotion
    of the Dark &#145;n Stormy, we also distribute its recommended
    mixture counterpart, Barritt&#146;s Ginger Beer, a well known
    non-alcoholic ginger beer from Bermuda. Gosling&#146;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&#146;s Black Seal was rated &#147;96&#148; out of a
    possible &#147;100&#148; and a &#147;Best Buy&#148;;</TD>
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    <TD>&#149;&nbsp;</TD>
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    <B><I>Gosling&#146;s Gold Bermuda Rum</I></B>&nbsp;&#150;
    Gosling&#146;s Gold Bermuda Rum, lighter in color than
    Gosling&#146;s Black Seal, was introduced in 2004. It is often
    combined with Gosling&#146;s Black Seal and fruit juices in the
    Rum Swizzle cocktail, a popular drink in Bermuda;&nbsp;and</TD>
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    <TD>&#149;&nbsp;</TD>
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    <B><I>Gosling&#146;s Old Rum</I></B>&nbsp;&#150; Gosling&#146;s
    Old Rum is a premium &#147;family reserve&#148; rum that is
    produced in limited quantities. Gosling&#146;s Old Rum was
    created based on the Gosling&#146;s Black Seal formula and then
    further aged in oak barrels.</TD>
</TR>

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<B><I>Sea Wynde.</I></B> In 2001, we introduced Sea Wynde, a
premium rum. For centuries, some of the world&#146;s finest rums
were made in pot stills and produced in small batches. Today,
pot stills have largely been replaced by the faster and more
economically efficient column stills, which do not produce the
robust character and flavor of pot stills. Sea Wynde is
distinctive in that it is made entirely from aged,
</DIV>

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pure pot still rums from the Caribbean and South America. Sea
Wynde won a five-star award (the highest offered) from Spirit
Journal in 2003.
</DIV>

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<B><I>Knappogue Castle Whiskey.</I></B> We developed our
Knappogue Castle Whiskey, a single malt Irish whiskey, in 1998,
taking advantage of an opportunity to build both on the
popularity of single malt Scotch whisky and the growth in the
Irish whiskey category. Knappogue Castle Whiskey is distilled in
pot stills using malted barley and is distinctive in that it is
vintage-dated based on the year of distillation. Our Knappogue
Castle Whiskey won the &#147;Spirit of the Year&#148; award from
Food&nbsp;&#38; Wine in 1999.
</DIV>

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<B><I>Knappogue Castle 1951.</I></B> Knappogue Castle 1951 is a
pure pot-still whiskey that was distilled in 1951 and then aged
for 36&nbsp;years in sherry casks. Knappogue Castle 1951 is one
of the oldest and rarest commercially available Irish whiskeys
in the world, with only 300&nbsp;bottles available for sale each
year. The name comes from a castle in Ireland, formerly owned by
Mark Edwin Andrews, the originator of the brand and the father
of Mark Andrews, our chairman, president and chief executive
officer.
</DIV>

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<B><I>Clontarf Irish whiskey.</I></B> Our family of Clontarf
Irish whiskeys currently represents a majority of our case sales
of Irish whiskey. Clontarf was launched in 2000 to meet the
growing demand for an accessible and smooth premium Irish
whiskey. Clontarf is distilled using quality grains and pure
Irish spring water and is then aged in bourbon barrels and
mellowed through Irish oak charcoal. Clontarf is available in
single malt, reserve and classic pure grain versions.
</DIV>

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<B><I>Brady&#146;s Irish cream liqueur.</I></B> We launched
Brady&#146;s Irish cream in late 2003 to capitalize on the
demand for high quality Irish creams. Brady&#146;s Irish cream
is made in small batches using single malt Irish whiskey, dairy
fresh cream and natural flavors.
</DIV>

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<B><I>Celtic Crossing liqueur.</I></B> Celtic Crossing was
developed in the mid 1990s by Gaelic Heritage, and is a unique
combination of Irish spirits, cognac and a taste of honey.
Celtic Crossing is one of the few liqueurs that are
honey-flavored, and it is enjoyed as an after dinner drink and
as a flavor enhancer in unique cocktails.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Pallini Limoncello.</I></B> Pallini Limoncello is a
premium lemon liqueur, which is served on the rocks or as an
ingredient in a wide variety of drinks, ranging from martinis to
iced tea. It is also used in cooking, particularly for pastries
and cakes. Pallini Limoncello is crafted from an authentic
family recipe created more than 100&nbsp;years ago by the
Pallini family. It is made with Italy&#146;s finest Sfusato
Amalfitano lemons that are hand-selected for optimal freshness
and flavor. There are also two other flavor extensions of this
Italian liqueur: Pallini Peachcello, made with white peaches,
and Pallini Raspicello, made from a combination of raspberries
and other berries.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Industry overview</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The overall beverage alcohol industry includes three major
segments: distilled spirits, wine and beer. We currently only
participate in the distilled spirits segment and, more
specifically, in the premium end of this market. Within
distilled spirits, sales of which reached nearly
$47&nbsp;billion in the United States alone during 2003, there
are three primary categories: white goods (vodka, rum, gin and
tequila), whiskey and specialties (including liqueurs and
cordials). In 2004, these three categories, excluding what are
referred to in the industry as local traditional liquors such as
unbranded Chinese spirits and Indian arracki, represented
approximately 936&nbsp;million global case sales, of which
approximately 161.7&nbsp;million case sales were made in the
United States. White goods are the largest category within the
distilled spirits market, representing 53% of the foregoing
global distilled spirits sales made in 2004, and vodka is the
largest sub-category of white goods, representing approximately
34% of such global distilled spirits sales made in 2004. Our two
leading brands, Boru vodka and Gosling&#146;s rum, are emerging
products within the white spirits category. We expect that each
of the premium spirits segments in which we compete will
continue to demonstrate favorable growth in the foreseeable
future, particularly as compared to the overall distilled
spirits market.
</DIV>

<P align="center" style="font-size: 11pt;">-51-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe the following are key industry trends:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    increasing consumer preference for liquor and cocktails across
    various age groups and demographics, as compared to wine and
    beer;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Within the United States, our products are included in the
imported segments of their distilled spirits categories, as all
of our products are produced outside of the United States.
Within the imported segments, the vast majority of the brands
are, like ours, premium brands. As the following case sales
tables indicate, there is significant historical and projected
growth in the imported portions of the distilled spirits
categories in which our products compete, and growth in these
imported segments is expected to outpace that of their overall
categories over the next five years.
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>U.S.&nbsp;Overall Distilled Spirits Consumption</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
Nine-liter case sales (in millions, except percentages)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Projected</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>case sales</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5-year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>case sales</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5-year</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Spirits category (each includes both the</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>for 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>growth</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>for 2010</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>growth</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>domestic and imported segments)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>(estimated)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1999-2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>(projected)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005-2010</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vodka</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    44.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    55.0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.3%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rum</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    19.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.8%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    22.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.8%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liqueurs/cordials</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    20.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    24.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.6%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Whiskey</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    42.0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.9%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    42.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="14">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other categories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    34.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    39.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.3%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="14">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total U.S.&nbsp;distilled spirits</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <B>161.7</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>14.3%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <B>183.9</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>10.8%</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 41%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Source: IMPACT Database Review and Forecast.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;consumption of distilled spirits reached
161.7&nbsp;million cases in 2004, representing a 14.3% growth
over the preceding five-year period, and case sales are expected
to reach 183.9&nbsp;million by 2010, reflecting a 10.8% growth
over the next five years. Within distilled spirits, vodka is the
largest category with approximately 44.8&nbsp;million cases sold
in 2004 and is expected to be the highest growth category with
an 18.3% growth rate over the next five years. Rum and
liqueurs/cordials are also expected to experience double-digit
growth with five-year growth estimates of 10.8% and 15.6%,
respectively.
</DIV>

<P align="center" style="font-size: 11pt;">-52-

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>U.S.&nbsp;Imported Distilled Spirits Consumption</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
Nine-liter case sales (in millions, except percentages)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Projected</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>case sales</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5-year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>case sales</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5-year</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>for 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>growth</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>for 2010</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>growth</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Imported spirits segment</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>(estimated)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1999-2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>(projected)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005-2010</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Imported vodka</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    12.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    17.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29.6%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Imported rum</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    2.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    2.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.3%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Imported liqueurs/cordials</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    10.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    14.0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23.9%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Irish whiskey</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    0.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    0.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20.0%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total for our segments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    25.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    34.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.3%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other imported whiskey</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    22.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.5%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    22.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.3%)</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other imported spirits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    16.0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    19.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.3%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total imported U.S.&nbsp;distilled spirits</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <B>64.6</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>20.5%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <B>76.5</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>14.2%</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 31%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Source: IMPACT Database Review and Forecast.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As the foregoing tables indicate, the imported segments of the
U.S.&nbsp;distilled spirits market categories in which we
compete together represent a significantly greater historical
and projected growth than that of the U.S.&nbsp;distilled
spirits market as a whole. The U.S.&nbsp;consumption of
distilled spirits in the imported segments in which we compete
are estimated to have reached 25.8&nbsp;million cases in 2004,
representing a 59.3% growth over the proceeding five-year
period, as compared to a 14.3% growth over such period for
U.S.&nbsp;distilled spirits as a whole. In addition, case sales
within our imported segments are expected to reach
34.7&nbsp;million by 2010, reflecting a 25.3% growth over the
next five years, as compared to a five year projected growth of
10.8% for U.S.&nbsp;distilled spirits as a whole. In addition,
the individual segments in which our premium brands compete,
i.e., imported vodka, imported rum, imported liqueurs/cordials
and Irish whiskey, demonstrated growth of 81.2%, 64.3%, 38.2%
and 66.7%, respectively, over the last five years and each such
segment is expected to achieve sizable additional growth over
the next five years, particularly imported vodka with a
projected 29.6% five-year growth rate. The growth in vodka is
attributable to its overall popularity, the recent trend in
flavor extensions and flexibility with different mixers. Rum
growth is also correlated to its mixability and new flavor
introductions. Liqueurs and cordials are increasingly popular
due to new innovative flavors tailored to individual taste
preferences, and Irish whiskey is one of the smaller yet faster
growing distilled spirits categories.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With our diverse portfolio of premium branded spirits and other
competitive strengths and our long-term strategy we believe that
we are well positioned to take advantage of recent consumer
trends in favor of high-end branded premium spirits and the
continuing growth projected for the premium segments of the
distilled spirits industry in which we have chosen to compete.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our competitive strengths</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that our competitive strengths include the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>our diverse portfolio of high quality, premium branded
    spirits in growing categories of the spirits industry.</I></B>
    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;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>our extensive and established U.S.&nbsp;distribution
    network and growing international distribution network in Europe
    and elsewhere.</I></B> We currently have distribution
    relationships with third-party distributors or brokers in all
    50&nbsp;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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>our significant sales and marketing expertise and
    experience.</I></B> 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.&nbsp;sales managers
    and two international sales managers, with an average of over
    15&nbsp;years of industry experience with premium spirits brands;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>our highly qualified and experienced management team with
    successful track records relating to brand development, the
    spirits industry, mergers and acquisitions and public
    companies.</I></B> Mark Andrews, our chairman, president 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 executive vice 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&nbsp;&#150;
    U.S.&nbsp;sales, had significant roles while at Carillon Imports
    in helping that company grow its Absolut Vodka and Bombay
    Sapphire Gin brands;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>our flexible and efficient supply chain.</I></B> 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;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>our recent track record in establishing strategic
    partnerships.</I></B> 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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our growth strategy</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our objective is to continue building a distinctive portfolio of
global premium spirits brands, with a primary focus on
increasing both our total and individual brand case sales. To
achieve this, we intend to continue:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>increasing market penetration of our existing spirits
    brands.</I></B> 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</TD>
</TR>

</TABLE>

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<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">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;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 11pt">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 11pt">building brand awareness
    through innovative marketing, advertising and promotional
    activities.</FONT></I></B><FONT style="font-size: 11pt"> 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&#146;s rum in global markets beyond
    its current loyal customer following in Bermuda and the eastern
    United States;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 11pt">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 11pt">selectively adding new
    premium brands to our spirits
    portfolio.</FONT></I></B><FONT style="font-size: 11pt"> 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.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Production and supply</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are several steps in the production and supply process for
spirits products. First, all of our products are distilled. This
is a multi-stage process that converts basic ingredients, such
as grain or sugar cane, into alcohol. Next, the alcohol is
processed and/or aged in various ways depending on the
requirements of the specific brand. In the case of our vodka,
this processing is designed to remove all other chemicals to the
maximum extent possible, so that the resulting liquid will be
odorless and colorless, and have a smooth quality with minimal
harshness. Achieving a high level of purity is relatively
complex and involves a series of distillations and filtration
processes.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the case of our flavored vodkas and all of our other spirits
brands, rather than removing flavor, various complex flavor
profiles are achieved through one or more of the following
techniques: infusion of fruit, addition of various flavoring
substances, and, in the case of our rums and whiskeys, aging of
the brands in various types of casks for extended periods of
time and the blending of several rums or whiskeys to achieve a
unique flavor profile for each brand. After the distillation,
purification and flavoring processes are completed, the various
liquids are bottled. This involves several important stages,
including bottle and label design and procurement, filling of
the bottles and packaging the bottles in various configurations
for shipment.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not have significant investment in distillation, bottling
or other production facilities or equipment. Instead, we have
entered into relationships with several companies to provide
those services to us for our various brands. We feel that these
types of arrangements are beneficial in that we do not have a
significant amount of capital committed to fixed assets and we
have the flexibility to meet
</DIV>

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growing sales levels by dealing with companies whose capacity
significantly exceeds our current needs. These relationships
vary on a brand-by-brand basis as discussed below.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Boru vodka</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a supply agreement with Carbery Milk Products Limited, a
member of the Carbery Group, a large distiller and food producer
based in Ballineen, Ireland, to provide us with the distilled
alcohol used in our Boru vodka. This supply agreement with
Carbery was originally entered into by Roaring Water Bay in 1998
and became ours in 2003, when we acquired Roaring Water Bay and,
with it, our Boru vodka brand. The supply agreement provides for
Carbery to produce natural spirit for us with specified levels
of alcohol content pursuant to specifications set forth in the
agreement and at specified prices through its expiration in
December 2008, in quantities to be designated by us annually. We
believe that Carbery has more than enough distilling capacity to
meet our needs for Boru vodka for the foreseeable future.
Carbery also produces the flavoring ingredients used in the Boru
vodka flavor extensions and in our Brady&#146;s Irish cream.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From Carbery, the quadruple distilled alcohol is delivered by
them to the bottling premises at Terra Limited in Baileyboro,
Ireland, where pursuant to our bottling and services agreement
with Terra it is filtered in several proprietary ways, pure
water is added to achieve the desired proof, and, in the case of
the citrus, orange and crazzberry versions of Boru vodka,
flavorings (obtained from Carbery) are added. Each of our Boru
vodka products is then bottled in various sized bottles. We
believe that Terra, which also acts as bottler for all of our
Irish whiskeys and as producer and bottler of our Brady&#146;s
Irish cream (and as bottler for Celtic Crossing which is
supplied to us by one of Terra&#146;s affiliates), has
sufficient bottling capacity to meet our current needs, and its
facility can be expanded to meet future supply needs, should
this be required.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to our bottling and services agreement with Terra,
which extends through February&nbsp;28, 2009, Terra provides
intake, storage, sampling, testing, filtering, filling, capping
and labeling of bottles, case packing, warehousing and loading
and inventory control for our Boru vodka brands and our
Knappogue Castle and Clontarf Irish whiskeys at prices that are
adjusted annually by mutual agreement based on changes in raw
materials and price indexes for consumer price index increases
up to 3&nbsp;1/2%. This agreement also provides for maintenance
of product specifications and minimum processing procedures,
including compliance with applicable food and alcohol
regulations and maintenance, storage and stock control of all
raw products and finished products delivered to Terra. All
alcohol is held on the premises by Terra under its customs and
excise bond. Terra has also agreed in the supply agreement not
to engage in any business in Ireland which competes either
directly or indirectly with our business as it relates to the
development, manufacture or supply of vodka or whiskey.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Gosling&#146;s
    rums</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Gosling&#146;s rums have been produced by Gosling&#146;s
Brothers Limited in Hamilton, Bermuda for approximately
150&nbsp;years and, pursuant to our distribution arrangements
with the Goslings, they have retained the right to act as the
sole supplier to Gosling-Castle Partners Inc. with respect to
our Gosling&#146;s rum requirements. They source their rums in
the Caribbean and transport them to Bermuda where they are
blended according to proprietary recipes. The rums are then sent
to the Heaven Hill plant in Bardstown, Kentucky where they are
bottled, packaged, stored and shipped to our various
distributors. Gosling&#146;s Brothers is in the process of
increasing its blending and storage facilities in Bermuda to
accommodate our supply needs for the foreseeable future. Heaven
Hill has one of the largest bottling facilities in the United
States with ample capacity to meet our projected supply needs.
See &#147;&#151;&nbsp;Strategic brand&#150;partner
relationships.&#148;
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Knappogue Castle and
    Clontarf Irish Whiskeys</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2005, we entered into a long-term supply agreement with Irish
Distillers, a subsidiary of Pernod Ricard, pursuant to which it
has agreed to supply us with the aged single malt and grain
</DIV>

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whiskeys used in our Knappogue Castle Whiskey and a Knappogue
Castle Whiskey blend we may produce in the future and all three
of our Clontarf Irish whiskey products. The supply agreement
provides for Irish Distillers to meet our running ten-year
estimate of supply needs for these products, each of which is
produced to a flavor profile prescribed by us. At the beginning
of each year of the agreement, we must nominate our specific
supply needs for each product for that year, which amounts we
are then obligated to purchase over the course of that year.
These amounts may not exceed the annual amounts set forth in the
running ten-year estimate unless approved by Irish Distillers.
The agreement provides for fixed prices for the whiskeys used in
each product, with escalations based on certain cost increases.
The whiskeys for the four products are then sent to Terra
Limited where they are bottled in bottles designed by us and
packaged for shipment.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Pallini
    Limoncello</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pallini Limoncello is produced by I.L.A.R. S.p.A., an Italian
company based in Rome and owned since 1875 by the Pallini
family. The Pallinis make their Limoncello using Sfusato
Amalfitano lemons in a proprietary infusion process. Once made,
the Limoncello is then bottled in their plant in Rome and
shipped to us pursuant to our long-term exclusive
U.S.&nbsp;marketing and distribution agreement. In addition to
Pallini Limoncello, I.L.A.R. produces Pallini Raspicello, using
a combination of raspberries and other berries and Pallini
Peachcello, using white peaches, and we are the exclusive
U.S.&nbsp;importer for both of these brands as well. We believe
that I.L.A.R. has adequate facilities in Rome to produce and
bottle sufficient Limoncello, Raspicello and Peachcello to meet
our foreseeable needs. See &#147;&#151;&nbsp;Strategic
brand-partner relationships.&#148;
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Brady&#146;s Irish
    cream</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Brady&#146;s Irish cream is produced for us by Terra. Fresh
cream is combined with Irish whiskey, grain neutral spirits and
various flavorings procured from the Carbery Group, to our
specifications and then bottled by Terra in bottles designed for
us. We believe that Terra has the capacity to meet our
foreseeable supply needs for this brand.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Celtic Crossing
    liqueur</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We acquired a 60% ownership interest in, and distribution rights
to, the Celtic Crossing brand of Irish liqueur in the United
States, Canada, Mexico, Puerto Rico and the islands between
North and South America, from Gaelic Heritage Corporation
Limited, an affiliate of Terra. In connection with these
arrangements, Gaelic Heritage retained the right to act as the
sole supplier to us of Celtic Crossing. Gaelic Heritage mixes
the ingredients comprising Celtic Crossing using a proprietary
formula and then Terra bottles it for them in bottles designed
for us. We believe that the necessary ingredients are available
to Gaelic Heritage in sufficient supply and that Terra&#146;s
bottling capacity is currently adequate to meet our projected
supply needs. See &#147;&#151;&nbsp;Strategic brand-partner
relationships.&#148;
</DIV>

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    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Sea Wynde rum</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With the assistance of a master blender, we source several aged
rums from Jamaica and Guyana for our Sea Wynde rum and then send
them to a bottling facility near Edinburgh, Scotland where they
are married together and bottled for us in bottles designed by
us. We are in the process of reevaluating our sourcing,
selection and bottling arrangements to provide for increasing
supplies of Sea Wynde rum on a cost effective basis.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Distribution network</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that one of our primary strengths is the distribution
network that we have developed with our sales team and our
independent distributors and brokers. We currently have
distribution and brokerage relationships with third-party
distributors in all 50&nbsp;states in the United States, as well
as material distribution arrangements in approximately six other
countries. We believe that our distribution network is similar
to that of our significantly larger competitors, providing a key
competitive advantage versus our competitors of similar size.
</DIV>

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    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

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    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">U.S.&nbsp;distribution</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Background.</I></B> Importers of distilled spirits in the
United States must sell their products through a three-tier
distribution system. Typically, an imported brand is first sold
to a U.S.&nbsp;importer, who then sells it to a network of
distributors, or wholesalers, covering the Unites States, in
either &#147;open&#148; states or &#147;control&#148; states. In
the 32 open states, the distributors are generally large,
privately held companies. In the 18 control states, the states
themselves function as the distributor, and suppliers such as us
are regulated by these states. The distributors and wholesalers
in turn sell to the individual liquor retailers, such as liquor
stores, restaurants, bars, supermarkets and other outlets in the
states in which they are licensed to sell beverage alcohol. In
larger states such as New York, more than one distributor may
handle a brand in separate geographical areas. In control
states, where liquor sales are controlled by the state
governments, importers must sell their products directly to the
state liquor authorities, which also act as the distributors and
either maintain control over the retail outlets or license the
retail sales function to private companies, while maintaining
strict control over pricing and profit.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;spirits industry has undergone dramatic
consolidation over the last ten years and the number of
companies and importers has significantly declined due to merger
and acquisition activity. There are currently six major spirits
companies, each of which own and operate their own importing
business. All companies, including these large companies, are
required by law to sell their products through wholesale
distributors in the United States, underscoring the importance
of that level of the distribution chain. The major companies are
increasingly exerting significant influence over the regional
distributors and as a result, it has become more difficult for
smaller companies to get their products recognized by the
distributors. Therefore, with the establishment of our
distribution network in all 50 states, we believe we have
overcome a significant barrier to entry in the U.S.&nbsp;spirits
business and enhanced our attractiveness as a strategic partner
for smaller companies lacking comparable distribution.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the fiscal year ended March&nbsp;31, 2005 and the three
months ended June 30, 2005, our U.S.&nbsp;sales represented
approximately 53% and 63%, respectively, of our revenues, and we
expect them to grow as a percentage of our total sales in the
future. See Note&nbsp;21 of Notes to Consolidated Financial
Statements.
</DIV>

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<B><I>Importation.</I></B> While we own most of our brands or,
by contract, have the exclusive right to act as
U.S.&nbsp;importer of the brands of our strategic partners, we
do not currently act as our own importer in the United States.
We currently hold the federal importer and wholesaler license
required by the Alcohol and Tobacco Tax and Trade Bureau, a
division of the U.S.&nbsp;Department of the Treasury, but we do
not yet have the state licenses necessary to sell our products
to the distributors in the individual states. Instead, we use
the services of a licensed importer to act as importer of record
on our behalf in the United States, both with respect to our
proprietary brands and those of our strategic partners.
</DIV>

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In 1998, we engaged MHW Ltd., a New York-based nationally
recognized and licensed importer, to coordinate the importing
and industry compliance required for the sales of our products
across the United States. Through the utilization of MHW&#146;s
national expertise and licenses, our inventory is strategically
maintained in one of the largest bonded warehouses on both
coasts (Western Carriers and Western Wine Services) and shipped
nationally by an extensive network of licensed and bonded
carriers. Pursuant to an agreement established on April&nbsp;15,
1998, as amended on December&nbsp;1, 2004, MHW also provides us
with certain logistical services as well as accounting,
inventory, insurance and disbursement services for our brands.
In addition, MHW provides an online tracking software, which
provides daily reports on sales of our products to our
distributors, receivables, inventory and cash receipts.
</DIV>

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Under the terms of our agreement with MHW, which extends until
March&nbsp;31, 2006, we pay MHW a monthly service fee of $4,900,
plus $1.00&nbsp;per case on all cases sold during the month.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until recently, it was much more cost effective for us to use
MHW as our U.S.&nbsp;importer and to rely on its state licenses
rather than expend the resources necessary to set up the
required licensing
</DIV>

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infrastructure internally. At this stage of our growth, however,
our revenue-based fees to MHW are reaching the point where it
begins to be more economical for us to assume the role of
importer ourselves. While we have commenced this process and
will begin to bring a number of the services provided by MHW
in-house during the next 12&nbsp;months, until we have obtained
the requisite licenses in a majority of the states, a process
that could take as long as a year, we will continue to rely on
MHW to perform the importing function for us.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Wholesalers and distributors.</I></B> In the United
States, we are required by law to use state licensed
distributors or, in the control states, state-owned agencies
performing this function, to sell our brands to the various
retail outlets. As a result, we are dependent on them not only
for sales but also for product placement and retail store
penetration. We have no distribution agreements or minimum sales
requirements with any of our distributors and they are under no
obligation to place our products or market our brands. In
addition, all of them also distribute the products and brands of
competitors of ours. As a result, the fostering and maintaining
of our relationships with our distributors is of paramount
importance to us. Through our internal sales team, we have
established relationships for our brands with wholesale
distributors in each state, and our products are currently sold
in the United States by approximately 80 wholesale distributors,
as well as by various state beverage alcohol control agencies.
</DIV>

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    <TD width="5%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">International
    distribution</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unlike the United States, the majority of the other countries in
which we sell our brands allow for sales to be made directly
from the brand owner to the various retail establishments,
including liquor stores, chain stores, restaurants and pubs,
without requiring that sales go through an importer or through a
distributor or wholesaler tier. In our international markets, we
do not use the services of an importer, although we use Terra
Limited to handle the billing, inventory and shipping for us
with respect to our non-U.S.&nbsp;markets, similar to that
aspect of our arrangement with MHW in the United States. We do,
however, rely primarily on established spirits distributors and
wholesalers in most of our non-U.S.&nbsp;markets in much the
same way as we do in the United States.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As in the United States, the spirits industry has undergone
consolidation internationally, with considerable realignment of
brands and brand ownership. The number of major spirits
companies internationally has been reduced significantly due to
mergers and brand ownership consolidation. While there are still
a substantial number of companies owning one or more brands,
most business is now done by six major companies each of whom
owns and operates its own distribution company in the major
international markets. These captive distribution companies
focus primarily on the brands of the companies that own them.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Even though we do not utilize the direct route to market in our
international operations, we do not believe that we are at a
significant disadvantage, because typically the local
wholesalers have significant and established relationships with
the retail accounts and are able to provide extensive customer
service, in store merchandising and on premise promotions. In
addition, even though we must compensate our wholesalers and
distributors in each market in which we sell our brands, we are,
as a result of using these distributors, still able to benefit
from substantially lower infrastructure costs and centralized
billing and collection.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our primary international markets are the Republic of Ireland,
the United Kingdom, Germany, France, Italy and Canada. In
addition, we have sales in a number of other countries in
Continental Europe and the Caribbean. For the fiscal year ended
March&nbsp;31, 2005 and the three months ended June&nbsp;30,
2005, our non-U.S.&nbsp;sales represented 47% and 37%,
respectively, of our revenues. See Note&nbsp;21 of Notes to
Consolidated Financial Statements.
</DIV>

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our sales team</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While we currently expect more rapid growth in the United
States, international markets hold considerable potential and
are an important part of our global strategy. We have begun
searching for a senior executive to oversee all of our
international operations. In the meantime, we are reevaluating
our international strategy on a market-by-market basis to
strengthen our distributor relationships, optimize our sales
team and effectively focus our financial resources.
</DIV>

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We currently have a total sales force of 28 people, including
six regional U.S.&nbsp;sales managers and two international
sales managers, with an average of over 15&nbsp;years of
industry experience with premium spirits brands.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Initially, in the United States, we engaged regional
representatives, known as brokers, on a part-time basis to work
with our distributors in core U.S.&nbsp;markets. These brokers
worked as if they were our internal sales personnel, but were
paid a per-case commission instead of a salary and related
benefits. Except in the control states where brokers continue to
provide valuable liaison services with state liquor commissions,
we have replaced these part-time representatives with highly
experienced full-time regional managers. Our current
U.S.&nbsp;sales regions and their respective managers are as
follows:
</DIV>

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<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>New England</I>&nbsp;&#150; William Walsh (joined us in 1999)
    was previously with Southern Wine&nbsp;&#38; Spirits, the
    largest wholesaler in the United States.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>East Coast</I>&nbsp;&#150; Robert Battipaglia (joined us in
    2003) was previously the East Coast Regional Manager for the
    Advantage Brands division of Allied Domecq.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Southeast</I>&nbsp;&#150; Louis Suffredini (joined us in
    2004) was previously a Regional Sales Manager in the Southeast
    with Allied Domecq.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Midwest</I>&nbsp;&#150; 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Southwest</I>&nbsp;&#150; Janell Eilers (joined us in 2004)
    was previously Texas State Sales Manager for the wine division
    of Diageo.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>West Coast</I>&nbsp;&#150; Bruce Smith (joined us in 2002)
    was previously with Southern Wine&nbsp;&#38; Spirits,
    specializing in chain sales.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Similar to our U.S.&nbsp;sales structure, working under our two
international sales managers, we have area sales managers for
the United Kingdom, Ireland, Northern Ireland and Continental
Europe.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our sales personnel are engaged in the day to day management of
our distributors, which includes setting quotas, coordinating
promotional plans for our brands, maintaining adequate levels of
stock, brand education and training and sales calls with
distributor personnel. In addition to distributor management,
our sales team also maintains relationships with key retail
customers through independent sales calls. They also schedule
promotional events, create local brand promotion plans, host our
in-store tastings in the jurisdictions where such promotions are
legal and provide waitstaff and bartender training and education
with respect to our brands.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Advertising, marketing and promotion</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to build our brands, we must effectively communicate
with three distinct audiences: our distributors, the retail
trade and the end consumer. We place significant emphasis on
advertising, marketing and promotional activities to establish
and reinforce the image of our brands, with the objective of
building substantial brand value. We also make a substantial
investment in these activities, significantly more on a per case
basis than many of our competitors who are seeking to maintain,
</DIV>

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rather than aggressively grow, their case sales. We are
committed to continuing aggressive advertising and promotion
activities to build our brands and their value and believe that
our execution of disciplined and strategic branding and
marketing campaigns will continue to drive our sales growth.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We employ full-time, in-house marketing, sales and customer
service personnel who work together with leading third party
design and advertising firms to maintain a high degree of focus
on each of our product categories and build brand awareness
through innovative marketing activities. We use a range of
marketing strategies and tactics to build brand equity and
increase sales, including market research, consumer and trade
advertising, price promotions, point-of-sale materials, event
sponsorship, in-store and on-premise promotions and public
relations, as well as a variety of other traditional and
non-traditional marketing techniques to support the sales of all
of our brands.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With respect to our leading brand, Boru vodka, we engage in a
number of promotions and incentive programs with our
distributors, advertise our brands in prominent trade
publications, and in 2004, initiated a major consumer marketing
campaign from Washington D.C. to Boston, with particular
emphasis on the New York Metro and Boston markets. In connection
with this marketing campaign, we engaged Fathom Communications
Inc., an innovative firm whose principals have experience with
large advertising agencies, to work with us. The campaign
positioned Boru as a clear-thinking, witty brand from Ireland
and is centered on a series of &#147;Boruisms,&#148; which
highlight the clarity of the product and the clarity of its
brand message. These appeared on phone kiosks and bus stops in
New York City and Boston, as well as in other high impact
locations, including a major presence in the New York City
subway. The campaign also utilized radio advertisements,
primarily on WEEI, the largest sports radio in Boston.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are now also putting substantial emphasis on consumer
advertising for Gosling&#146;s rum and, through Gosling-Castle
Partners, have engaged Kelly&nbsp;&#38; Co., an innovative firm
in Boston which specializes in high-end consumer goods, to
assist us in this project. Our Gosling&#146;s campaign is
utilizing substantial billboard coverage along the east coast of
the United States and selected regional print space in major
national publications such as Time, Newsweek and Food&nbsp;&#38;
Wine, and it communicates that this famous Bermuda brand is now
becoming available in the United States.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to traditional advertising, we also place heavy
emphasis on four other marketing methods to support our brands:
public relations, events, tastings and marketing to celebrities.
We have an extensive public relations effort in the United
States, which has helped gain important editorial coverage for
our brands. Event sponsorship is an economical way for us to
have our brands tasted by influential consumers, and we actively
contribute product to trend setting events where our brand has
exclusivity in the brand category. We also conduct hundreds of
in-store and on-premise promotions each year. In addition, we
provide our products to celebrities appearing on various
television programs.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We support our marketing efforts for our brands with a wide
assortment of point-of-sale materials such as mirrors, banners,
glassware, table tents, shelf talkers, case cards, napkins and
apparel. The combination of trade and consumer programs,
supported by attractive point-of-sale materials, also
establishes greater credibility for us with our distributors and
retailers.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also place a significant emphasis on our bottle design,
labeling and packaging to establish and reinforce the image of
our brands. For instance, we currently offer our Boru vodka and
two of its flavor extensions, as well as our three Clontarf
Irish whiskeys, in the award-winning Trinity bottle, which
consists of three stacked 200 ml. bottles. We are also in the
process of significantly redesigning and upgrading the quality
of our standard Boru vodka bottle and have engaged Claessens
International, a widely respect design firm based in London, to
assist us with this project. We believe that this new bottle
will be an important contributor to the further building of the
Boru vodka brand. We intend to continue trade advertising and
promotional events for Boru vodka and to resume more substantial
consumer advertising once this new bottle is on the market.
</DIV>

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<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While the majority of our advertising, marketing and promotional
budget is focused on the U.S. market, we are also active with
certain of the same types of activities in Ireland, the United
Kingdom, Germany and a growing number of other international
markets.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Strategic brand-partner relationships</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A key component of our growth strategy and one of our
competitive strengths is our ability to forge strategic
relationships with owners of both emerging and established
spirits brands seeking opportunities to increase their sales
beyond their home markets and achieve global growth. Our
original relationship with the Boru vodka brand was as its
exclusive U.S. distributor. To date, we have also established
strategic relationships with respect to Gosling&#146;s rum,
Pallini Limoncello and Celtic Crossing, all of which
relationships are described below, and we will endeavor to
continue expanding our brand portfolio through similar such
arrangements in the future.
</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Gaelic Heritage Corporation
    Limited/Celtic Crossing</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 1998, we entered into an exclusive national
distribution agreement with Gaelic Heritage Corporation Limited,
an affiliate of Terra Limited, one of our suppliers, which was
subsequently amended in April 2001, pursuant to which we
acquired from Gaelic a 60% ownership interest, and our importer,
MHW, acquired a 10% ownership interest, in the Celtic Crossing
brand in the United States, Canada, Mexico, Puerto Rico and the
islands between North and South America. We also have the right
to acquire 70% of the ownership of the Celtic Crossing brand in
the remainder of the world. We also acquired the exclusive right
to distribute Celtic Crossing on a world-wide basis. Under the
terms of the agreement with Gaelic, as amended, we have the
right to purchase from Gaelic, based upon our forecasts, cases
of Celtic Crossing at annually agreed costs and a royalty
payment per case sold at various rates depending on the
territory and type of case sold. During the term of the
agreement, without the prior written consent of Gaelic, we may
not distribute any other Irish liqueur/cordial unless it is
bottled in Gaelic&#146;s (Terra&#146;s) facilities. Pursuant to
the terms of the agreement, Gaelic provides us with
<FONT face="times new roman,times">&#128;</FONT>6.3&nbsp;million
($7.6 million) of product liability insurance. The agreement may
be terminated, among other things, upon notification by either
party that the other party has materially breached the agreement
and such breach is not cured within 60&nbsp;days of the date
such notice is given.
</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">I.L.A.R. S.p.A./Pallini
    Limoncello</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2004, we entered into an exclusive marketing and
distribution 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.&nbsp;distribution rights
with respect to its Pallini Limoncello and a right of first
refusal on related brand extensions.
</DIV>

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During the period through December&nbsp;31, 2007, we have the
right to purchase Limoncello at a stipulated price subject to
one adjustment in 2006 or 2007 to reflect the inflation rate in
the Italian economy and subject to further adjustment for raw
material increases of 5% or more during any quarter to the
extent the increase is above the rate of inflation and only for
the period the increase is maintained. After 2007, I.L.A.R. has
the discretion to raise prices as long as the price increases do
not exceed those of major competitors for comparable products.
I.L.A.R. is required to maintain certain product standards, and
we have input into adjustments of the product and packaging. We
are required to prepare a preliminary annual strategy plan for
advertising and distribution for review and are required to make
certain advertising, marketing and promotional expenditures
based on volume. The initial term of the agreement expires on
December&nbsp;31, 2009 and is automatically renewed for either
three or five years, based on case sales in 2009. I.L.A.R.
indemnifies us in the United States for claims arising out of
compliance with U.S.&nbsp;laws or regulations or relating to the
quality or fitness of products and maintains $5&nbsp;million of
insurance upon which we are named an additional insured. We
indemnify I.L.A.R. for claims arising out of claims relating to
the marketing, promotion, sale or distribution of the
</DIV>

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products and maintain $5&nbsp;million of standard product
liability insurance upon which I.L.A.R. is the named insured.
Additional agreements are pending regarding I.L.A.R.&#146;s
distribution of our products.
</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Gosling-Castle Partners
    Inc./Gosling&#146;s rums</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective as of January 2005, we entered into a national
distribution agreement with Gosling&#146;s Export (Bermuda)
Limited, referred to as Gosling&#146;s Export, pursuant to which
we obtained the exclusive right to distribute the Gosling&#146;s
rum products, which have been produced by the Gosling family in
Bermuda for over 150&nbsp;years, and Gosling&#146;s rum-related
gourmet food products in the United States. In February 2005, we
expanded this relationship by purchasing a 60% controlling
interest in a strategic export venture, now named Gosling-Castle
Partners Inc., with the Gosling family. Gosling-Castle Partners
was formed to enter into an export agreement with Gosling&#146;s
Export that gives Gosling-Castle Partners the exclusive right to
distribute Gosling&#146;s rum and related products on a world
wide basis (other than in Bermuda) and assigns to Gosling-Castle
Partners all of Gosling&#146;s Export&#146;s interest in our
January 2005 U.S.&nbsp;distribution agreement with them. In
exchange for the global distribution rights under the export
agreement, Gosling-Castle Partners issued a note to
Gosling&#146;s Export in the principal amount of
$2.5&nbsp;million, payable in four equal installments of
$625,000 bi-annually through October&nbsp;1, 2006. The export
agreement has an initial term expiring in April 2020, subject to
a 15&nbsp;year extension if certain case sale targets are met.
Under the terms of the export agreement, which commenced in
April 2005, Gosling-Castle Partners is generally entitled to a
stipulated share of the proceeds from the sale, if ever, of the
ownership of any of the Gosling&#146;s brands to a third-party,
through a sale of the stock of Gosling&#146;s Export or its
parent, with the size of such share depending upon the number of
case sales made during the twelve months preceding the sale. In
addition, prior to selling the ownership of any of their brands
that are subject to these agreements, the Goslings family must
first offer such brand to Gosling-Castle Partners and then to
us. To obtain our interest in Gosling-Castle Partners, we
contributed $5.0&nbsp;million to its capital, which amount
consisted of $100,000 in cash and a promissory note in the
principal amount of $4.9&nbsp;million payable bi-annually
through April&nbsp;1, 2007. Pursuant to our arrangement with the
Goslings, they have retained the right to act, through
Gosling&#146;s Brothers Limited, as the sole supplier to
Gosling-Castle Partners with respect to our Gosling&#146;s rum
requirements.
</DIV>

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<B>Intellectual property</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Trademarks are an important aspect of our business. Our brands
are protected by trademark registrations or are the subject of
pending applications for trademark registration in the United
States, European Community and other countries where we
currently distribute the brand or have plans to distribute the
brand. In some cases, the trademarks are registered in the names
of our various subsidiaries and related companies. Generally,
the term of a trademark registration varies from country to
country, and, in the United States, trademarks expire and need
to be renewed every ten years. We will continue to register our
trademarks in additional markets as we expand our distribution
territories.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into distribution agreements for brands owned by
third parties, such as Pallini and the Gosling&#146;s rums. The
Pallini and Gosling&#146;s rum brands are registered by their
respective owners and we have the exclusive right to distribute
the Gosling&#146;s rums on a worldwide basis (other than in
Bermuda) and the Pallini brands in the United States. See
&#147;&#151;Strategic brand-partner relationships.&#148;
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our unique &#147;trinity&#148; bottle is the subject of a
U.S.&nbsp;Design Patent owned by The Roaring Water Bay (Research
&#38; Development Company) Limited. In December 2003, we entered
into a license agreement with Roaring Water Bay
Research&nbsp;&#38; Development) Company Limited whereby we
obtained an exclusive license to use the patent for a five-year
term ending in December 2008. We pay a royalty equal to 8% of
the net invoice price of all products sold using the trinity
bottle or otherwise disposed of by us, subject to a maximum of
<FONT face="times new roman,times">&#128;</FONT>30,000 ($36,198)
per year. The agreement also includes the right to acquire the
patent for the Trinity bottle
for&nbsp;<FONT face="times new roman,times">&#128;</FONT>90,000
($108,594), which we intend to exercise prior to the
consummation of this offering.
</DIV>

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<B>Information systems</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We employ Microsoft Great Plains as our financial reporting
system worldwide. This system is hosted by a third party in
Washington,&nbsp;D.C. and is accessible remotely by our
personnel globally via secured Internet connection. We maintain
local area networks, referred to as LANS, in both our Dublin and
New York offices. These LANS support email communication and
Internet connectivity for these offices and, in addition,
support such features as automatic data back-up and recovery in
the event of a hardware failure at a local terminal. These LANS
are maintained by professional third-party service providers at
each location.
</DIV>

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We have also entered into a 36-month contract with Dimensional
Insight, Inc. for its InterReport service. Among other things,
this service provides business intelligence regarding sales of
our products held by our distributors, inventory levels at our
distributors and shipments of our products from distributors to
specific retailers, as well as reporting formats that compare
this information against comparable prior year periods. We
consider this to be a valuable tool for our sales force and
financial planners as it provides the feedback required to
improve the accuracy of sales forecasting and inventory
management, and the effectiveness of our sales and marketing
promotions.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Over the past ten years, the U.S.&nbsp;distilled spirits
industry has undergone dramatic consolidation and realignment of
brands and brand ownership. The number of major spirits
importers in the United States has significantly declined due to
mergers and brand ownership consolidation. While historically
there were a substantial number of companies owning one or more
major brands, today there are six major companies: Diageo,
Pernod Ricard, Bacardi, Brown-Forman, Fortune Brands and
Constellation Brands. These companies are the leading importers
of spirits to the U.S.&nbsp;market, but often are not positioned
well to partner with small to mid-size brands or in situations
in which family members prefer to remain involved longer term,
thereby creating an opportunity for us.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we compete on the basis of quality, price, brand
recognition and distribution strength. Our premium brands
compete with other alcoholic and nonalcoholic beverages for
consumer purchases, as well as for shelf space in retail stores,
restaurant presence and wholesaler attention. In addition to the
six major companies discussed above, we compete with numerous
multinational producers and distributors of beverage alcohol
products, many of which have greater resources than we do.
</DIV>

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<B>Seasonality</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our industry is subject to seasonality with peak sales in each
major category generally occurring in the fourth calendar
quarter, which is our third fiscal quarter. See &#147;Risk
Factors&nbsp;&#151; Our quarterly operating results have
fluctuated in the past and may fluctuate significantly in the
future rendering quarter-to-quarter comparisons unreliable as
indicators of performance.&#148;
</DIV>

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<B>Government regulation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Alcohol and Tobacco Tax and Trade Bureau of the United
States Treasury Department regulates the spirits industry with
respect to production, blending, bottling, sales and advertising
and transportation of alcohol products. Also, each state
regulates its advertising, promotion, transportation, sale and
distribution of alcohol products within its jurisdiction. In
countries other than the United States in which we operate, we
are subject to similar regulations. We are also required to
conduct business in the United States only with holders of
licenses to import, warehouse, transport, distribute and sell
spirits.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the 18 U.S. control states, the state liquor commissions act
in place of distributors and decide which products are to be
purchased and offered for sale in their respective states.
Products are
</DIV>

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selected for purchase and sale through listing procedures which
are generally made available to new products only at
periodically scheduled listing interviews. Products not selected
for listings can only be purchased by consumers through special
orders, if at all.
</DIV>

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The distribution of alcohol-based beverages is also subject to
extensive taxation both in the United States and
internationally, and in the United States, at both the federal
and state level.
</DIV>

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We believe that we are in material compliance with all
applicable federal, state and other regulations. However, we
operate in a highly regulated industry which may be subject to
more stringent interpretations of existing regulations. Future
costs of compliance with changes in regulations could be
significant.
</DIV>

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<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;27, 2005, we had 49 employees, of which 28
were in sales and 21 were in management, finance, marketing and
administration. Of our employees, 33 are full time employees in
the United States and 16 are employed outside of the United
States in countries including Ireland and Great Britain.
</DIV>

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<B>Properties</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our executive offices are located in New York, New York, where
we lease approximately 3,800&nbsp;square feet of office space
under a sublease that expires on March&nbsp;30, 2008. We also
lease approximately 7,500&nbsp;square feet of office space in
Dublin, Ireland under a lease that expires on February&nbsp;28,
2009 and approximately 1,000&nbsp;square feet of office space in
Houston, Texas under a lease that expires on March&nbsp;31, 2006.
</DIV>

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<B>Legal proceedings</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that neither we nor any of our wholly owned
subsidiaries is currently subject to litigation. We may,
however, become involved in litigation from time to time
relating to claims arising in the ordinary course of our
business. These claims, even if not meritorious, could result in
the expenditure of significant financial and managerial
resources.
</DIV>

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<A name='112'></A>
</DIV>

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<B>MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Directors and executive officers</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding our
directors and executive officers as of the closing of this
offering:
</DIV>

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<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Andrews</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman of the Board, President and Chief Executive Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Keith A. Bellinger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President, Chief Operating Officer and Secretary</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    T. Kelley Spillane</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#150; U.S.&nbsp;Sales</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Matthew F. MacFarlane</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President and Chief Financial Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John Beaudette</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director(1)(2)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert J. Flanagan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director(2)(3)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Phillip Frost,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Colm Leen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director(3)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Richard C. Morrison</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director(1)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Frederick M. R. Smith</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director(2)(3)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Kevin P. Tighe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director(1)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Member of the nominating and corporate governance committee</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Member of the compensation committee</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    Member of the audit committee</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Mark Andrews,</I></B> our chairman of the board, president
and chief executive officer, founded our predecessor company,
Great Spirits Company LLC, in 1998. Mr.&nbsp;Andrews has served
as our president, chief executive officer and chairman of the
board since December 2003. Mr.&nbsp;Andrews founded American
Exploration Company, a company engaged in the exploration and
production of oil and natural gas, in 1980. He oversaw that
company becoming publicly traded in 1983 and served as its
chairman and chief executive officer until its merger with Louis
Dreyfus Natural Gas Corp. in October 1997. In addition,
Mr.&nbsp;Andrews is a director of IVAX Corporation, a worldwide
producer and marketer of generic and proprietary drugs. He also
serves as a life trustee of The New York Presbyterian Hospital
in New York City. Mr.&nbsp;Andrews received a bachelor of arts
from Harvard College in 1972 and a masters of business
administration from Harvard Business School in 1975.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Keith A. Bellinger,</I></B> our executive vice president,
chief operating officer and secretary, joined us in May 2005. He
has over 18&nbsp;years of experience in the spirits industry,
including eight years with Allied Domecq PLC, a company in the
business of spirits, wines and quick service restaurants. While
at Allied Domecq, Mr.&nbsp;Bellinger served as chief financial
officer of the U.S.&nbsp;Spirits Division from September 1996 to
August 2000. From September 2000 to August 2002,
Mr.&nbsp;Bellinger served as the general manager and executive
vice president of the ADvantage Brands division of Allied
Domecq, a division focused on emerging brands. From September
2002 to December 2004, he served as president of the Northern
Business Unit of Allied Domecq U.S., one of the largest
divisions of that company, where he oversaw all operations.
Mr.&nbsp;Bellinger began his career in public accounting.
Mr.&nbsp;Bellinger received a bachelor of business
administration from the University of Texas at Austin in 1980.
</DIV>

<P align="center" style="font-size: 11pt;">-66-

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>T. Kelley Spillane,</I></B> our senior vice
president&nbsp;&#151; U.S.&nbsp;sales, joined us in
April&nbsp;1, 2000. From April&nbsp;1, 2000 to December 2003,
Mr.&nbsp;Spillane served as vice president-sales of Great
Spirits Company, and was appointed executive vice
president&nbsp;&#151; U.S.&nbsp;sales in December 2003. Prior to
joining us, Mr.&nbsp;Spillane worked at Carillon Importers
Limited, a division of Grand Metropolitan PLC. Carillon
developed and launched Absolut Vodka and Bombay Sapphire Gin. At
Carillon, Mr.&nbsp;Spillane served as assistant manager for its
control states and duty free divisions and was promoted to
director of special accounts, focusing on expanding sales in
national accounts. Mr.&nbsp;Spillane received a bachelor of
science in business administration from Ramapo College in 1985.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Matthew F. MacFarlane,</I></B> our senior vice president
and chief financial officer, joined us in December 2003. From
October 2001 to July 2003 Mr.&nbsp;MacFarlane served as
corporate controller of Fusion Telecommunications International,
Inc., an international communications carrier. In November 1984,
Mr.&nbsp;MacFarlane joined Prodigy Communications Corporation,
an internet service provider, which went public in February
1999. Mr.&nbsp;MacFarlane served as vice president and corporate
controller at Prodigy from April 1998 to May 2001. Prior to
Prodigy, Mr.&nbsp;MacFarlane worked at KPMG LLP and
PriceWaterhouseCoopers International Limited, working primarily
in the audit divisions. In addition to being a certified public
accountant, Mr.&nbsp;MacFarlane is a certified management
accountant and a certified internal auditor. Mr.&nbsp;MacFarlane
received a bachelor of science degree from Fordham University in
1975 and a masters of business degree from Pace University in
1979.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>John F. Beaudette </I></B>has served as a director of our
company since January 2004. Since 1995, Mr.&nbsp;Beaudette has
been the president of MHW, Ltd. (formerly named Monsieur Henri
Wines Ltd.), a national alcoholic beverage importer, distributor
and service company. From 1985 to 1994, Mr.&nbsp;Beaudette
worked with PepsiCo Inc. and its affiliate company Monsieur
Henri Wines in the distribution of Stolichnaya Vodka and other
imported wine and spirit brands. During this period,
Mr.&nbsp;Beaudette held positions such as director of planning
for PepsiCo Wines&nbsp;&#38; Spirits International and vice
president of finance and chief financial officer of Monsieur
Henri Wines. Mr.&nbsp;Beaudette currently sits on the board of
directors of The National Association of Beverage Importers Inc.
(NABI)&nbsp;and serves on its executive committee.
Mr.&nbsp;Beaudette received a bachelor of science degree in
accounting from Villanova University in 1979.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Robert J. Flanagan </I></B>has served as a director of our
company since January 2004. Since 1989, Mr.&nbsp;Flanagan has
served as the executive vice president of Clark Enterprises
Inc., a Bethesda, Maryland-based investment holding company and
as the manager of CNF Investments LLC, an affiliate of Clark
Enterprises Inc. CNF Investments LLC is one of our principal
stockholders. Mr.&nbsp;Flanagan oversees the acquisition,
management and development of new investment opportunities for
Clark and is a member of the board of directors of Martek
BioSciences Corporation. Prior to joining Clark,
Mr.&nbsp;Flanagan was the treasurer, secretary and member of the
board of directors of the Baltimore Orioles, Inc. and began his
career in public accounting. Certified as a public accountant in
Washington, D. C., Mr.&nbsp;Flanagan received a bachelor of
science in business administration from Georgetown University in
1978 and a master of science degree in taxation from the
American University School of Business in 1985.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Philip Frost,&nbsp;M.D.</I></B>, has served as a director
of our company since September 2005. Since 1987, Dr.&nbsp;Frost
has served as chairman of the board of directors and chief
executive officer of IVAX Corporation, a worldwide producer and
marketer of generic and proprietary drugs. He also served as the
president of IVAX Corporation from 1991 until 1995. He is a
member of the board of directors of IVAX Diagnostics, Inc.,
Northrop Grumman Corporation, Continucare Corporation and
Cellular Technical Services Company, Inc. He is also a director
of Ladenburg Thalmann&nbsp;&#38; Co. Inc., an underwriter in
this offering and our placement agent in connection with the
sale of our Series&nbsp;C convertible preferred stock in 2004
and 2005. He is a member, and former chairman, of the board of
trustees of the University of Miami and a co-vice chairman of
the board of governors of the American Stock Exchange.
Dr.&nbsp;Frost received a bachelor of arts degree from
University of Pennsylvania in 1957 and a doctor of medicine
degree from Albert Einstein College of Medicine in 1961.
</DIV>

<P align="center" style="font-size: 11pt;">-67-
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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Colm Leen </I></B>has served as a director of our company
since January 2004. Mr.&nbsp;Leen also serves as a director of
our subsidiaries, Castle Brands Spirits Group Limited and Castle
Brands Marketing and Sales Company Limited. Since 1995,
Mr.&nbsp;Leen has been the group finance director and company
secretary of the Carbery Group, a supplier to our company. The
Carbery Group is involved in the dairy, food ingredients and
beverage alcohol industries, with established markets in
Ireland, the United Kingdom, mainland Europe, the Far East and
North America. Mr.&nbsp;Leen has been with the Carbery Group
since 1988, initially joining it as company accountant and
subsequently assuming the role of its financial controller in
1992 and his present role of group finance director in 1995.
Mr.&nbsp;Leen is also the executive director of Carbery Milk
Products Limited. Prior to joining Carbery, Mr.&nbsp;Leen worked
with KPMG LLP from 1984 to 1988. He qualified as a chartered
accountant in 1987, became an associate of the Institute of
Chartered Accountants in Ireland in 1987 and a fellow of the
Institute in 1997. Mr.&nbsp;Leen received a bachelor of commerce
degree from University College Cork in 1984.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Richard C. Morrison </I></B>has served as a director of
our company since September 2005. Mr.&nbsp;Morrison worked at
Massachusetts Mutual Life Insurance Co. from 1964 until his
retirement in 2004. Most recently, Mr.&nbsp;Morrison served as
the managing director of Babson Capital Management, the
investment subsidiary of Massachusetts Mutual. Massachusetts
Mutual is a more than 5% stockholder of our company. He also
serves as a director of Reinhold Industries, Inc., Cains Foods,
L.P., Nyloncraft, Inc., Tubular Textile Machinery, Inc. and is
an advisory director of Hammond, Kennedy, Whitney and Co., Inc.
Mr.&nbsp;Morrison received a bachelor of arts from West Virginia
Wesleyan College in 1962 and a master of science in finance from
the University of Arizona in 1964.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Frederick M. R. Smith </I></B>has served as a director of
our company since January 2004. Mr.&nbsp;Smith also serves as a
director of our subsidiary, Gosling-Castle Partners Inc. Since
January 2002, Mr.&nbsp;Smith has been a financial consultant
through his wholly owned company, Kirkwood Lane Associates LLC.
From 1967 to January 2002, he worked at Credit Suisse First
Boston, most recently as co-head of Credit Suisse First
Boston&#146;s international private equity activities.
Mr.&nbsp;Smith currently acts as a consultant to Credit Suisse
First Boston. Mr.&nbsp;Smith, an investor in our company, joined
Credit Suisse First Boston&#146;s private equity group in 1995
after playing a senior role in Credit Suisse First Boston&#146;s
investment banking division and founding its media and telecom
group. He has over 30&nbsp;years of private equity and
investment banking experience with Credit Suisse First Boston.
Mr.&nbsp;Smith also serves as a director of Unwired Australia,
Teleperformance Brazil and Slager Radio Hungary. Mr.&nbsp;Smith
received a bachelor of arts degree from Yale University in 1963
and attended Johns Hopkins&#146; School of Advanced
International Studies in Washington, DC.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Kevin P. Tighe </I></B>has served as a director of our
company since September 2005. Since 1995, Mr.&nbsp;Tighe has
been a partner at, and is a founding partner of, the law firm of
Tighe Patton Armstrong Teasdale, PLLC. For over 36&nbsp;years,
Mr.&nbsp;Tighe has represented the automobile industry and its
trade associations before the U.S.&nbsp;Congress and other
federal agencies. He also maintains a real estate practice at
the firm. Mr.&nbsp;Tighe received a bachelor of arts degree from
St. Angelm&#146;s College in 1966 and received a doctor of
jurisprudence from Catholic University School of Law in 1969.
Mr.&nbsp;Tighe is a member of the bar of the District of
Columbia and the U.S.&nbsp;Supreme Court.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Other key employees and consultants</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Amelia M. Gary,</I></B> the vice president&nbsp;&#150;
finance and administration of our U.S.&nbsp;subsidiary, Castle
Brands (USA)&nbsp;Corp., joined us in October 2002. From October
2002 to December 2003, Ms.&nbsp;Gary served as vice
president&nbsp;&#150; finance of Great Spirits Company, our
predecessor company, and was appointed vice
president&nbsp;&#150; finance and administration of Castle
Brands (USA)&nbsp;Corp. as of December 2003. Ms.&nbsp;Gary
oversees investor relations and human resources and is involved
in our capital raising and banking activities. From August 1995
to September 2002, Ms.&nbsp;Gary was with Brown Brothers
Harriman&nbsp;&#38; Co., a private bank, most recently as a vice
president in the commodities finance division, specializing in
coffee, cocoa and tea. Ms.&nbsp;Gary earned a bachelor of arts
degree from Connecticut College in 1995.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>E.&nbsp;Malcolm B. Gosling </I></B>has served as president
and chief executive officer of our export venture,
Gosling-Castle Partners Inc., since April 2005. Gosling-Castle
Partners is owned 60% by us,
</DIV>

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<DIV align="left" style="font-size: 11pt;">
with the remainder owned by Mr.&nbsp;Gosling and Gosling&#146;s
Limited in Bermuda. In his capacity as president of our export
venture, he oversees the global exports of the Gosling&#146;s
rum brands into the United States and various other markets.
Since 2003, Mr.&nbsp;Gosling has served as president of Gosling
Export (Bermuda) Limited, a Bermuda based company responsible
for the production and shipping of Gosling&#146;s rum, and
serves as a director of the Bermuda holding company. Since 1989,
Mr.&nbsp;Gosling has also served as the vice president and
managing director of Gosling Brothers Limited, the parent
company of Gosling Export (Bermuda). Mr.&nbsp;Gosling has been
active with the family business for over 20&nbsp;years, and
represents the seventh generation of his family to be active in
the business. Mr.&nbsp;Gosling received a bachelor of arts
degree from Boston College in 1985.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Thomas O&#146;Connor,</I></B> the global procurement and
logistics manager of one of our Irish subsidiaries, Castle
Brands Spirits Group Limited, joined us in December 2003.
Mr.&nbsp;O&#146;Connor served as procurement and planning
manager at Roaring Water Bay from November 2002 to December
2003. Prior to joining Roaring Water Bay, Mr.&nbsp;O&#146;Connor
worked for over 20&nbsp;years as the sales and production
planning manager with The Irish Glass&nbsp;Bottle Company, a
manufacturer of high quality containers for the food and drink
industry. Mr.&nbsp;O&#146;Connor received a computer programming
diploma from Trinity College Dublin in 1983.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>David Phelan </I></B>currently serves as one of our
consultants. Prior to becoming a consultant, Mr.&nbsp;Phelan
served as executive vice president and a director of our company
from December 2003 to October 2005. In July 1998,
Mr.&nbsp;Phelan co-founded Roaring Water Bay Spirits Co. Ltd.,
where he served as managing director until its merger with us.
Mr.&nbsp;Phelan has over 20&nbsp;years of international
commercial and marketing experience in the liquor industry,
including working as a director at R&#38;A Bailey in key
European and Asian markets, both domestic and duty free. He has
also worked on several new brand development projects, including
The Dunhill Cognac brand, which was launched in Asia by Diageo/
Grand Met, and the Baileys Whiskey brand. Mr.&nbsp;Phelan
received a bachelor of arts degree from Trinity College Dublin
in 1983.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Patrick Rigney </I></B>currently serves as one of our
consultants. Prior to becoming a consultant, Mr.&nbsp;Rigney
served as executive vice president and a director of our company
from December 2003 to March 2005. In July 1998, Mr.&nbsp;Rigney
co-founded Roaring Water Bay, where he served as managing
director until its merger with us. Mr.&nbsp;Rigney has over
20&nbsp;years of international and commercial marketing
experience in the liquor industry, including working as a
director at R&#38;A Bailey, with responsibility for the
Bailey&#146;s Irish cream brand in the Americas, Australia and
Asia. Mr.&nbsp;Rigney received a bachelor of commerce degree
from the University College Dublin in 1982.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Roseann Sessa,</I></B> the vice president&nbsp;&#150;
marketing and public relations of our U.S.&nbsp;subsidiary,
Castle Brands (USA)&nbsp;Corp., joined us in February 1998. From
February 1998 to December 2003, Ms.&nbsp;Sessa served as vice
president&nbsp;&#150; marketing of Great Spirits Company, our
predecessor company, and was appointed vice
president&nbsp;&#150; marketing and public relations of Castle
Brands (USA)&nbsp;Corp. in December 2003. Ms.&nbsp;Sessa is
responsible for developing and implementing our marketing plans
in the United States. Prior to joining us, Ms.&nbsp;Sessa served
for eight years as assistant to Mr.&nbsp;Andrews, our chairman,
while he was the chairman of American Exploration Corporation.
From 1979 to 1990, Ms.&nbsp;Sessa worked at Lane Bryant, a
division of The Limited, Inc., a marketer of women&#146;s
apparel. Ms.&nbsp;Sessa attended the Berkley Business School in
1974.
</DIV>

<P align="center" style="font-size: 11pt;">-69-

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board composition and committees</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amended and restated certificate of incorporation and
amended and restated bylaws allow the board of directors to set
the number of directors by resolution. Currently, our board of
directors consists of eight directors. All of our directors will
serve until the annual meeting of stockholders to be held in
2006. Our bylaws authorize our board of directors to appoint one
or more committees, each consisting of one or more directors.
Our board of directors currently has three standing committees:
an audit committee, a compensation committee, and a
nominating/corporate governance committee, the composition and
responsibilities of each of which are described below:
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Nominating and corporate governance committee</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The nominating and corporate governance committee is responsible
for, among other things:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    selecting the slate of nominees of directors to be proposed for
    election by the stockholders and recommending to the board of
    directors individuals to be considered by the board of directors
    to fill vacancies;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    developing and implementing policies regarding corporate
    governance matters and recommending any desirable changes to
    such policies to the board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establishing criteria for selecting new directors; and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and assessing annually the performance of the
    nominating and corporate governance committee and the adequacy
    of the nominating and corporate governance committee charter.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The members of our nominating and corporate governance committee
are Messrs.&nbsp;Morrison, Beaudette and Tighe.
Mr.&nbsp;Morrison serves as the chairman of this committee.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Audit committee</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The audit committee is responsible for, among other things:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    appointing, overseeing and compensating the work of the
    registered independent public accounting firm;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing our quarterly financial statements and earnings
    releases;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pre-approving all auditing services and permissible non-audit
    services provided by our registered independent public
    accounting firm;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    engaging in a dialogue with the registered independent public
    accounting firm regarding relationships which may impact the
    independence of the registered independent public accounting
    firm and being responsible for oversight of the independence of
    the registered independent public accounting firm;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and approving the audit committee report to be filed
    with the SEC;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing with the outside auditor the adequacy and
    effectiveness of the internal controls over our financial
    reporting;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establishing procedures for the submission of complaints,
    including the submission by our employees of anonymous concerns
    regarding questionable accounting or auditing matters;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing with our chief executive officer and chief financial
    officer any significant deficiencies in the design or operation
    of our internal controls and any fraud, whether or not material,
    that involves our management or other employees who have a
    significant role in our internal controls;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and assessing annually the adequacy of the audit
    committee charter.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The members of our audit committee are Messrs.&nbsp;Flanagan,
Leen and Smith. Mr.&nbsp;Flanagan serves as chairman of the
committee.
</DIV>

<P align="center" style="font-size: 11pt;">-70-

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Compensation committee</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The principal responsibilities of the compensation committee
are, among others:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and determining annually the compensation of our chief
    executive officer and other executive officers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    preparing an annual report on executive compensation for
    inclusion in our annual proxy statement for each annual meeting
    of stockholders in accordance with applicable SEC rules and
    regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    approving the form of employment contracts, severance
    arrangements, change in control provisions and other
    compensatory arrangements with executive officers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    approving compensation programs and grants involving the use of
    our common stock and other equity securities;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and assessing annually, the compensation
    committee&#146;s performance and the adequacy of the
    compensation committee charter.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The members of our compensation committee are
Messrs.&nbsp;Smith, Beaudette and Flanagan. Mr.&nbsp;Smith
serves as the chairman of this committee.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Director compensation and other information</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For service on our board of directors, we annually compensate
our non-employee directors with options granted under our stock
incentive plan. At the end of each fiscal year, we grant each of
our non-employee directors options to
purchase&nbsp;5,000&nbsp;shares of our common stock. In
addition, we grant additional options to
purchase&nbsp;1,000&nbsp;shares of common stock to each
non-employee director who serves on a committee. After the
consummation of this offering, we intend to pay our non-employee
directors $10,000&nbsp;per year for serving on our board in
addition to the stock options referred to above and increase the
options granted annually to directors serving on the audit
committee from 1,000 to 2,500.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also reimburse each non-employee director for travel and
related expenses incurred in connection with attendance at board
and committee meetings. Employees who also serve as directors
receive no additional compensation for their services as a
director.
</DIV>

<P align="center" style="font-size: 11pt;">-71-

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive compensation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the total compensation for
services in all capacities to us received by our chief executive
officer, our other executive officers whose annual salary and
bonus exceeded $100,000 during the fiscal year ended
March&nbsp;31, 2005, and a current executive officer who we
believe will be one of our four most highly compensated
executive officers for the fiscal year ending March&nbsp;31,
2006. We refer to these individuals as our &#147;named executive
officers.&#148;
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary compensation table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Long-term</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Annual compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Awards</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>All other</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name and principal position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Bonus</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>compensation</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Andrews</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>169,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <I>Chairman, President and Chief Executive Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Keith Bellinger(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <I>Executive Vice President, Chief Operating Officer and
    Secretary</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    T. Kelley Spillane</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,415</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <I>Senior Vice President, U.S. Sales</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David Phelan(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>152,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,788</TD>
    <TD align="left" valign="bottom" nowrap>(4)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <I>Executive Vice President, International Sales</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Matthew F. MacFarlane</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>147,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,369</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <I>Senior Vice President and Chief Financial Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 25%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Mr.&nbsp;Bellinger became our chief operating officer on
    May&nbsp;2, 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.&nbsp;Bellinger
    currently holds options to purchase a total of
    150,000&nbsp;shares of our common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Represents the amounts of life insurance premiums paid by us for
    the benefit of Mr.&nbsp;Spillane.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    As of the date of this prospectus, Mr.&nbsp;Phelan is no longer
    one of our executive officers, and he is engaged as a consultant
    to our company through March&nbsp;31, 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)</TD>
    <TD align="left">
    Represents $15,288 contributed by us to our pension plan on
    behalf of Mr.&nbsp;Phelan and patent royalty payments to
    Mr.&nbsp;Phelan in the amount of $12,500.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)</TD>
    <TD align="left">
    Represents the amounts of life insurance premiums paid by us for
    the benefit of Mr.&nbsp;MacFarlane.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">-72-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Option grants</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information with respect
to stock options we granted during the fiscal year ended
March&nbsp;31, 2005 to each of the named executive officers:
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Option grants in last fiscal year</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Potential realizable value</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Individual grants</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>at assumed annual rates</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>of stock price</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>appreciation for option</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>options granted to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(1)</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>underlying options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>employees in fiscal</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>price per</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expiration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>granted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>share (2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Date</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>10%</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Andrews</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.61%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/27/15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Keith Bellinger (3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    T. Kelley Spillane</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.36%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/27/15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David Phelan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Matthew F. MacFarlane</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.72%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/27/15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 32%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    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
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    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.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    Mr.&nbsp;Bellinger became our chief operating officer on
    May&nbsp;2, 2005. On that date, Mr.&nbsp;Bellinger received
    options to purchase a total of 150,000&nbsp;shares of our common
    stock at an exercise price per share of $8.00. The option vests
    at the rate of 25%&nbsp;per year commencing in May 2006 and
    expires on May&nbsp;2, 2015.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Option values and holdings</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table describes, for each of the named executive
officers, the exercisable and unexercisable options held by them
as of March&nbsp;31, 2005. The &#147;Value of unexercised
in-the-money options at fiscal year-end&#148; shown in the table
represents an amount equal to the difference between the
midpoint of the proposed range of the initial public offering
price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and the option exercise price multiplied by the number of
unexercised in-the-money options.
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fiscal year-end option values</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Number of shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Value of unexercised</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>underlying unexercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>in-the-money options</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>options at fiscal year-end</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>at fiscal year-end</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>acquired on</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value realized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Andrews</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Keith Bellinger (1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    T. Kelley Spillane</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David Phelan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Matthew F. MacFarlane</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 25%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Mr.&nbsp;Bellinger became our chief operating officer on
    May&nbsp;2, 2005. On that date, Mr.&nbsp;Bellinger received
    options to purchase a total of 150,000&nbsp;shares of our common
    stock at an exercise price per share of $8.00, which vest at the
    rate of 25%&nbsp;per year, commencing May 2006. As of the date
    hereof, Mr.&nbsp;Bellinger has not exercised any of his options.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Agreements with named executive officers</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Agreement with Mark Andrews.</I></B> On December&nbsp;1,
2003, we entered into a five-year employment agreement with Mark
Andrews, our chairman of the board, president and chief
executive officer. The employment agreement, as amended
effective as of May&nbsp;2005, provides for a current annual
base salary of $275,000, with increases based on periodic
reviews in the sole discretion of the compensation committee of
our board of directors.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The employment agreement prohibits Mr.&nbsp;Andrews from
competing with us during the term of the employment agreement
and for 12&nbsp;months thereafter; provided that we continue to
pay Mr.&nbsp;Andrews&#146; salary during that period. The
employment agreement also prohibits Mr.&nbsp;Andrews from, for
the term of the agreement and for 12&nbsp;months thereafter,
soliciting our customers to divert their business away from us
or soliciting our employees to leave their employment with us or
soliciting individuals who were our employees during the year
prior to Mr.&nbsp;Andrews&#146; termination.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The employment agreement also granted Mr.&nbsp;Andrews an option
to purchase&nbsp;50,000&nbsp;shares of our common stock
exercisable at $6.00&nbsp;per share. This stock option is
subject to the provisions of our stock incentive plan and a
stock option agreement between us and Mr.&nbsp;Andrews.
Mr.&nbsp;Andrews&#146; stock option vests in 20% installments
annually over the term of his employment agreement. If
Mr.&nbsp;Andrews is terminated without cause or if
Mr.&nbsp;Andrews terminates his employment with us for
&#147;good reason,&#148; including the termination of employment
by Mr.&nbsp;Andrews within 30&nbsp;days of certain events,
including a material diminution in his duties or a material
breach by us of the employment agreement, he may exercise any
vested stock options within 90&nbsp;days of termination and for
a period of 90&nbsp;days after the expiration of the
12&nbsp;month non-compete provision. In addition, any unvested
stock options that would have vested within 12&nbsp;months of
the date of his termination will become vested at the end of the
12&nbsp;month period and will be exercisable for a period of
90&nbsp;days following the 12&nbsp;month period.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Andrews is entitled to 12-months salary if his
employment is terminated by us without cause or if
Mr.&nbsp;Andrews terminates his employment with us for good
reason. Mr.&nbsp;Andrews may terminate his employment for any
reason upon 60&nbsp;days&#146; notice to us. We may terminate
Mr.&nbsp;Andrews at any time for &#147;cause&#148; such as
personal dishonesty, willful misconduct, breach of fiduciary
duty or failure to substantially perform his duties (other than
due to disability) or any willful violation of any law or
material breach of any provision of the employment agreement. No
payments, other than payments for salary already earned as of
the date of termination will be payable to Mr.&nbsp;Andrews upon
termination by us for cause or by Mr.&nbsp;Andrews for no reason.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Andrews&#146; employment is terminated following a
change of control (as described below), he is entitled to his
base salary then in effect for a period of 24&nbsp;months
following termination. In addition, provided Mr.&nbsp;Andrews
complies with the non-compete and non-solicit provisions, all of
his unvested stock options will vest and will be exercisable for
90&nbsp;days after such termination and for 90&nbsp;days
following the expiration of the 12-month non-compete provision.
Under the employment agreement, a &#147;change of control&#148;
occurs if (1)&nbsp;35% or more of our capital stock is acquired
by any person other than us, (2)&nbsp;there is a merger or other
change in corporate structure after which 49% or more of our
capital stock is no longer held by the stockholders who held
such shares prior to the change of control or (3)&nbsp;20% or
more of the members of our board elected by stockholders are
persons who were not nominated in the then most recent proxy
statement of our company.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Agreement with T. Kelley Spillane.</I></B> On
December&nbsp;1, 2003, we entered into a five-year employment
agreement with T. Kelley Spillane, our senior vice
president&nbsp;&#151; U.S.&nbsp;sales. The employment agreement,
as amended effective as of July&nbsp;2005, provides for a
current annual base salary of $175,000, with increases based on
periodic reviews in the sole discretion of the compensation
committee of our board of directors.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The employment agreement otherwise contains the same terms as
Mr.&nbsp;Andrews&#146; employment agreement, except that
Mr.&nbsp;Spillane was granted an option to
purchase&nbsp;60,000&nbsp;shares of our common
</DIV>

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<DIV align="left" style="font-size: 11pt;">
stock, rather than 50,000&nbsp;shares. In addition,
Mr.&nbsp;Spillane&#146;s stock option vests in 25% installments
over four years, rather than 20% installments over 5&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Agreement with Keith Bellinger.</I></B> On May&nbsp;2,
2005, we entered into an employment agreement with Keith
Bellinger, our executive vice president, chief operating officer
and secretary. Pursuant to the employment agreement,
Mr.&nbsp;Bellinger&#146;s employment continues until terminated
by him or by us. The employment agreement provides for a current
annual base salary of $270,000, with increases in the sole
discretion of our board of directors. An increase in
Mr.&nbsp;Bellinger&#146;s base salary to $300,000 will be
considered by the compensation committee of our board of
directors in January 2006, based on targeted achievements to be
decided upon by Mr.&nbsp;Bellinger and our chairman and chief
executive officer. The employment agreement also includes
incentive performance bonuses of up to 100% of the base salary
based upon performance targets agreed upon by Mr.&nbsp;Bellinger
and our chairman and chief executive officer. The employment
agreement also provides certain benefits, including a
$900&nbsp;per month car allowance. For 2005, if the performance
goals are met, the first $100,000 of incentive bonus is to be
paid in January 2006, and the balance, if any, of the bonus
shall be paid following March&nbsp;31, 2006. Bonuses paid for
all other years shall be payable after the end of our fiscal
year.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The employment agreement also granted Mr.&nbsp;Bellinger an
option to purchase&nbsp;150,000&nbsp;shares of our common stock
exercisable at $8.00&nbsp;per share. These stock options are
subject to the provisions of our stock incentive plan and a
stock option agreement between us and Mr.&nbsp;Bellinger.
Mr.&nbsp;Bellinger&#146;s stock options vest in equal annual
installments over a four year period.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The employment agreement prohibits Mr.&nbsp;Bellinger from
soliciting our customers to divert their business away from us
or soliciting our employees to leave their employment with us
during his employment for a period of (1)&nbsp;six months
following termination of employment if such termination occurs
on or before May&nbsp;2, 2006 or (2)&nbsp;one year following
termination of employment if such termination is after
May&nbsp;2, 2006.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Bellinger&#146;s employment is terminated by us
without cause, by reason of disability or if Mr.&nbsp;Bellinger
resigns with &#147;good reason,&#148; including a material
diminution in his duties, a material breach by us of the
employment agreement, a significant relocation of
Mr.&nbsp;Bellinger&#146;s principal work location, or a change
of control (as described below), he is entitled to a
continuation of his salary and certain health benefits for one
year (six months if termination of his employment occurs prior
to May&nbsp;2, 2006) and his pro rata performance bonus for the
year in which his employment terminates. In addition,
Mr.&nbsp;Bellinger may terminate his employment for any reason
upon 60&nbsp;days&#146; notice to us.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the employment agreement, a &#147;change of control&#148;
occurs if there is a merger, consolidation or exchange of
securities after which a majority of our capital stock is no
longer held by the stockholders who held such shares prior to
the change of control, or a sale of substantially all of our
assets.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Agreement with Matthew F. MacFarlane.</I></B> On
December&nbsp;17, 2003, Mr.&nbsp;MacFarlane, our senior vice
president and chief financial officer, agreed to a summary of
agreement of the terms of his employment with us.
Mr.&nbsp;MacFarlane&#146;s annual base salary is
$145,000&nbsp;per year and he is eligible to receive a
discretionary annual bonus of up to 25% of his base salary.
Mr.&nbsp;MacFarlane received a $10,000 sign-on bonus. In
addition, he receives a car allowance and was provided a term
life insurance policy in the amount of $500,000.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;MacFarlane was granted options to purchase
25,000&nbsp;shares of our common stock exercisable at
$6.00&nbsp;per share. This option is subject to our stock
incentive plan and a stock option agreement between us and
Mr.&nbsp;MacFarlane. Mr.&nbsp;MacFarlane&#146;s stock option
vests in equal annual installments of 25% over a four-year
period. The summary of agreement provides that if we are sold or
merged and there is a change of control, all of
Mr.&nbsp;MacFarlane&#146;s options will become fully vested and,
if he does not receive a comparable position with the new
company, we will pay him $75,000.
</DIV>

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Agreement with David Phelan.</I></B> On August&nbsp;4,
2005, we entered into a consulting agreement with David Phelan,
our former director and executive vice president. The consulting
agreement provides that on October&nbsp;1, 2005 Mr.&nbsp;Phelan
will become a consultant for us for a period of eighteen months
and resign as a director and executive vice president of our
company.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Phelan&#146;s consulting agreement provides for our
annual payment to him of
<FONT face="times new roman,times">&#128;</FONT>157,500
($190,040) plus value added tax to the extent he is required to
pay it, paid monthly. In addition, options held by
Mr.&nbsp;Phelan will remain exercisable until December&nbsp;1,
2008 and, absent a breach by him, he will accrue three
years&#146; vesting at the end of his eighteen month consulting
period. Mr.&nbsp;Phelan will also be reimbursed for expenses in
accordance with our reimbursement policy, including up to
<FONT face="times new roman,times">&#128;</FONT>5,000 ($6,033)
in legal fees.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consulting agreement contains certain non-compete and
non-solicitation provisions. However, after March&nbsp;31, 2006,
Mr.&nbsp;Phelan may request that we allow him to engage in such
activities. If we refuse, Mr.&nbsp;Phelan is no longer subject
to such restrictions and we must pay him his consulting fee for
the rest of the consulting period, or at his option, a lump sum
equal to <FONT face="times new roman,times">&#128;</FONT>10,417
($12,569) plus value added tax, if applicable, times the number
of months left in the consulting period.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Royalty payments paid by us under the license agreement between
us and The Roaring Water Bay (Research &#38; Development)
Company Limited with respect to the Trinity bottle shall
continue during Mr.&nbsp;Phelan&#146;s consulting period, but
under the consulting agreement we have agreed to purchase his
interest in such company on or prior to the termination of the
consulting relationship, at which time such royalty payments
shall stop.
</DIV>

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<B>2003 Stock Incentive Plan</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain the Castle Brands Inc. 2003 Stock Incentive Plan,
which was adopted by our board of directors on July&nbsp;10,
2003, became effective on August&nbsp;8, 2003, and was amended
February&nbsp;17, 2004 to reflect the name change of our
company. We refer to the 2003 Stock Incentive Plan, as amended,
as the plan. The following description of the plan is qualified
by reference to the full text thereof, a copy of which is filed
as an exhibit to the registration statement of which this
prospectus is a part. We received stockholder approval of our
stock incentive plan on August&nbsp;8, 2003.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Awards</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plan provides for the grant of incentive stock options,
non-qualified stock options, restricted stock, deferred stock,
and stock appreciation rights which may be granted to our
employees, officers, directors, consultants and advisers of us
or any entity in which we own more than a 50% beneficial
interest, except that incentive stock options may be granted
only to employees.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Administration</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plan is administered by our compensation committee or such
other committee as our board may designate to administer the
plan. Subject to the terms of the plan and applicable law, the
committee has the authority to (i)&nbsp;designate plan
participants; (ii)&nbsp;determine the type or types of awards to
be granted to a participant, (ii)&nbsp;determine the number of
shares of our common stock to be covered by, or with respect to
which payments, rights or other matters are to be calculated in
connection with, awards, (iv)&nbsp;determine the terms and
conditions of any awards, including vesting schedules (and
whether to accelerate such schedules), performance criteria and
how and when such awards may be settled and (v)&nbsp;to
interpret the plan and any award made thereunder. The
compensation committee&#146;s decision will be final, conclusive
and binding with respect to the interpretation and
administration of the plan, any award or any award agreement
under the plan.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Share reserve</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An aggregate of 2,000,000&nbsp;shares of common stock are
reserved for issuance under the plan. As of September&nbsp;27,
2005, outstanding options to purchase a total of
878,500&nbsp;shares of our common
</DIV>

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<DIV align="left" style="font-size: 11pt;">
stock were held by participants under the plan, and
1,121,500&nbsp;shares remained available for grant. If an
outstanding grant is surrendered, canceled or terminated without
having been exercised, or a related award is surrendered,
canceled or terminated without the award holder having received
payment, the related shares shall again be available for grant.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of any corporate event affecting the shares of our
common stock, the committee in its sole discretion may make such
adjustments and other substitutions to the plan and awards under
the plan as it deems equitable.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Term of the
    plan</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plan will terminate in August 2013 unless it is terminated
earlier in accordance with the terms of the plan.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Stock options</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation committee may grant both incentive stock
options, referred to as ISOs, and non-qualified stock options,
referred to as NSOs, under the plan. The exercise price for
options is set by the committee, but for ISOs, may not be less
than the fair market value (as defined in the plan) of our
common stock on the grant date. In the case of an ISO granted to
an employee who at the time of such grant is a 10% stockholder,
the exercise price cannot be less than 110% of fair market value
of a share of our common stock on the grant date. The
compensation committee has the discretion to determine the
vesting schedule of each option grant. Options previously
granted under the plan generally have a vesting schedule which
vests 20% of the award on each of the first five anniversaries
of the grant date. However, options also have been granted that
are immediately exercisable. The term of each option is decided
by the committee, however no option may be exercisable beyond
ten years from the grant date. Upon the exercise of an option,
the option holder must make payment of the full exercise price,
either: (i)&nbsp;in cash; (ii)&nbsp;to the extent permitted by
law and the compensation committee, in shares of common stock
(which have been owned by the participant for at least six
months or such other period as determined by the committee);
(iii)&nbsp;on such other terms (including a combination of the
methods described in (i)&nbsp;and (ii)&nbsp;and conditions as
may be acceptable to the compensation committee. The committee
may provide that any shares paid for upon exercise of a stock
option using restricted or deferred stock will be restricted or
deferred in the same manner as the stock so used.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Restricted
    stock</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation committee may award rights to purchase
restricted stock under the plan. Purchasers of restricted stock
are subject to restrictions on transfer, which will lapse as
long as a vesting requirement is met. Restricted stock may vest
over time, or may vest based on the attainment of performance
criteria or other factors, as determined by the compensation
committee at the time of the grant. If permitted by the
committee, holders of restricted stock may exercise full voting
rights with respect to the restricted stock. The committee may
provide that dividends will be paid to a participant holding
restricted stock. If dividends on restricted stock are received
in stock, they may be subject to the same restrictions as the
restricted stock to which they relate.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Deferred stock</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The committee may make an award of deferred stock under the
plan, and determine the terms and conditions of such award. A
deferred stock award is a grant of a right to received our
common stock in the future, if the grant conditions, which may
depend on performance goals or other criteria as determined by
the committee, are met. Once the deferral period ends (provided
applicable criteria have been met), the participant can receive
the award in shares of stock, in cash equal to the fair market
value of the deferred stock or a combination of shares and cash,
as determined by the committee.
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Stock appreciation
    rights</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The committee may grant stock appreciation rights (SARs) either
in tandem with a stock option or independent of a stock option
under the plan. Upon the exercise of an SAR, the holder will
receive cash, shares of our common stock or a combination
thereof as determined by the committee equal to the value excess
of the fair market value of one share of our common stock on the
date of exercise over the exercise price per share of the SAR,
which exercise price is set by the committee when it makes the
award. The compensation committee will determine the terms and
conditions of SARs at the time of grant.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Transferability of options
    and stock purchase rights</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plan generally does not allow for the transfer of awards
granted under the plan and only the grantee may exercise option
rights or rights to purchase shares granted under the plan
during his or her lifetime. The plan does not impose any
restrictions on transferability of common stock issued under the
plan other than restricted stock pending lapse of restrictions.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Change in
    control</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plan provides that, unless otherwise provided at the time of
grant by the committee (or by amendment of a grant), in the
event of a change of control of us or the publication or
dissemination of an announcement of an action intended to result
in a change in control of us with respect to individuals in
service at the time of the change in control:
</DIV>

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<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    all outstanding stock options and SARs will become immediately
    vested and fully exercisable;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    all restrictions and deferral periods applicable to restricted
    stock awards and deferred stock awards shall lapse and will be
    fully vested.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For these purposes, a change in control includes the following
events
</DIV>

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<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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);&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    during any period of two consecutive years, a change in the
    composition of the majority of the board which is not supported
    by a
    <FONT style="font-size: 70%"><SUP>2</SUP></FONT>/<FONT style="font-size: 60%">3</FONT>
    majority of the incumbent directors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A change in control does not include an initial public offering
of our stock or the temporary holding of our securities by an
underwriter pursuant to such offering.
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Tax
    withholding</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to the terms and conditions of the awards as provided by
the committee, a participant may irrevocably elect to have the
withholding tax obligation with respect to any awards satisfied
by (i)&nbsp;having us withhold the amount of shares otherwise
deliverable equal to such tax; (ii)&nbsp;deliver to us shares of
unrestricted stock equal to such tax or (iii)&nbsp;through any
combination described in clause&nbsp;(i) and&nbsp;(ii).
</DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT style="font-size: 11pt">Amendment and
    termination</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plan may be amended modified or terminated by our board of
directors may at any time, in whole or in part, without the
approval of the stockholders except that to the extent such
approval is required by law, or is otherwise required for ISOs
to continue to be treated as such. Our board of
</DIV>

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directors, however, may not impair the rights of a participant
with respect to awards granted prior to such amendment,
suspension or termination, without the consent of such
participant.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
It is intended that the plan will be amended to the extent
deemed necessary or appropriate to comply with Internal Revenue
Code Section&nbsp;409A and the rules, regulations and guidance
thereunder.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Pension Plan</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain a group defined contribution arrangement which
provides retirement benefits for employees who are located in
Ireland. Eleven employees currently participate in this pension
program. Under the pension program, we contribute a percentage
of the participating employee&#146;s salary to the program. All
contributions, including our contributions, made to the program
are immediately vested. All contributions made to the program
are held in trust and we have appointed trustees to manage the
funds. Total monthly premiums for the program for the 2005 plan
year equal <FONT face="times new roman,times">&#128;</FONT>4,719
($5,694), <FONT face="times new roman,times">&#128;</FONT>3,625
($4,374) of which represent our contributions. Benefits under
the program are payable upon the participant&#146;s attaining
the normal retirement age; early retirement or retirement due to
ill health, or upon the death of the participant prior to
retirement.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With respect to Mr.&nbsp;Phelan, each year we contributed to the
program an amount equal to 10% of his base salary and he
contributed 5% of his base salary as an employee contribution.
In addition to this Mr.&nbsp;Phelan is making further additional
voluntary contributions of 10.5% of his base salary. The monthly
employer additional voluntary contributions for such plan year
equals <FONT face="times new roman,times">&#128;</FONT>1,563
($1,886) and his monthly additional voluntary contributions for
such plan year equals
<FONT face="times new roman,times">&#128;</FONT>1,094 ($1,320)
Mr.&nbsp;Phelan&#146;s normal retirement age under the program
is age&nbsp;60. As of October&nbsp;1, 2005, Mr.&nbsp;Phelan will
become a consultant to us and will no longer be an employee.
Pursuant to the rules of the program, only employees and
directors may participate in the program and receive and/or make
new contributions thereunder. Because Mr.&nbsp;Phelan will be a
consultant, he will no longer be eligible to make or receive new
contributions under the program. Therefore, after
October&nbsp;1, 2005 we will not be making any further
contributions to the program on his behalf, nor will
Mr.&nbsp;Phelan be permitted to make any additional
contributions on his behalf under the pension program.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='113'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since April&nbsp;1, 2002, there has not been, nor is there any
proposed transaction where we were or will be a party in which
the amount involved exceeded or will exceed $60,000 and in which
any director, executive officer, holder of more than 5% of any
class of our voting securities, or any member of the immediate
family of any of the foregoing persons had or will have a direct
or indirect material interest, other than the employment
described in &#147;Management&#148; and the transactions
described below. These related party transactions were each
negotiated at an arm&#146;s length basis and were on no less
favorable terms to us than would have been given to a third
party.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Agreement with MHW Ltd.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since April 1998, we and our predecessor have had an agreement
with MHW Ltd., through which MHW acts as importer of record and
distributor for our products in the United States, and provides
accounting, inventory, payment, transportation and storage
services for us. Mr.&nbsp;Beaudette, one of our directors, is
the president and a principal stockholder of MHW and MHW has a
10% ownership interest in our Celtic Crossing brand. For the
fiscal years ended March&nbsp;31, 2003, 2004 and 2005, we
incurred fees for services rendered by MHW in the amounts of
$61,518, $84,450 and $121,393, respectively.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Agreement with BPW LLC</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2004, we contracted with BPW LLC, for business
development services including providing introductions for us to
agency brands and assisting us in successfully negotiating
agency agreements with targeted brands. BPW is controlled by
John Beaudette, one of our directors. The contract provides for
a monthly retainer to BPW of $3,500, a bonus payable to BPW in
equal quarterly installments upon the finalization of an agency
brand agreement based upon estimated annual case sales by us
during the first year of operations at the rate of
$1.00&nbsp;per each nine-liter case of volume, less any retainer
previously paid, and a commission based upon actual future sales
of the agency brand while under our management. This contract is
cancelable by either party upon 30&nbsp;days written notice. For
the fiscal year ended March&nbsp;31, 2005 we paid BPW $41,802.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Agreements with Carbery Group and its affiliates</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Leen, one of our directors, is the financial director
of the Carbery Group, one of our principal stockholders. Since
December&nbsp;1, 2003, we have had a supply agreement with
Carbery Milk Products Limited, which is a member of the Carbery
Group, pursuant to which it acts as our sole distiller for Boru
vodka in Ireland and the supplier of natural flavors for our
products. For the fiscal years ended March&nbsp;31, 2004 and
2005, we purchased approximately
<FONT face="times new roman,times">&#128;</FONT>84,572 and
<FONT face="times new roman,times">&#128;</FONT>405,359,
respectively, (recorded as $105,241 and $510,510, respectively,
in our consolidated financial statements for such fiscal years)
of goods from Carbery Milk Products. Carbery Milk Products also
holds&nbsp;<FONT face="times new roman,times">&#128;</FONT>304,400
($367,289) principal amount of our 5% euro denominated notes,
which were issued to it in connection with our December 2003
acquisition of Roaring Water Bay and will convert into shares of
our common stock immediately prior to the closing of this
offering. In addition, on December&nbsp;1, 2004, we repaid
subordinated indebtedness to Carbery Milk Products also incurred
by us in connection with the Roaring Water Bay acquisition in
the amount
of&nbsp;<FONT face="times new roman,times">&#128;</FONT>111,102.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Agreements with Ladenburg Thalmann&nbsp;&#38; Co. Inc.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, we entered into a placement agency agreement
with Ladenburg Thalmann&nbsp;&#38; Co. Inc., one of the
co-managing underwriters of this offering, to act as our
placement agent in connection with the offering and sale of our
Series&nbsp;C convertible preferred stock. Dr.&nbsp;Frost,
</DIV>

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<DIV align="left" style="font-size: 11pt;">
one of our directors, is a principal stockholder and director of
Ladenburg Thalmann. As placement agent for that offering, we
paid Ladenburg Thalmann aggregate placement fees of $406,080
and, on various dates from November 2004 to August 2005, issued
warrants to Ladenburg Thalmann and its designees exercisable for
the purchase of an aggregate of 63,856&nbsp;shares of our common
stock at an exercise price of $8.00&nbsp;per share. As a
co-managing underwriter of this offering, Ladenburg Thalmann
will also receive part of the underwriting compensation paid by
us in connection with this offering. See
&#147;Underwriting.&#148;
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transactions with Knappogue Corp.</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the fiscal year ended March&nbsp;31, 2005, we paid rental
fees to Knappogue Corp. for the use of Knappogue Castle, located
in Clare County, Ireland, for various corporate purposes
including meetings and to entertain customers. Knappogue Corp.
is one of our principal stockholders and is controlled and owned
by Mr.&nbsp;Andrews, our chairman, president and chief executive
officer, and members of his family. For the fiscal years ended
March&nbsp;31, 2003, 2004 and 2005, we paid Knappogue Corp.
$28,009, $33,000 and $13,000, respectively, in rental fees.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Loans from certain executive officers, directors and
stockholders</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;9, 2004 our wholly owned subsidiary, Castle Brands
(USA)&nbsp;Corp., issued, and we guaranteed, approximately
$4.6&nbsp;million principal amount of senior notes secured by
the accounts receivable and inventories of Castle Brands
(USA)&nbsp;to 27 investors in a private financing. As issued,
these senior notes bore an interest rate of 8% payable
semi-annually on November&nbsp;30 and May&nbsp;31, and matured
on May&nbsp;31, 2007. Effective August&nbsp;15, 2005, the terms
of these notes were modified, with the consent of the
noteholders, to mature on May&nbsp;31, 2009 in exchange for an
interest rate increase to 9%. In addition, each purchaser of
senior notes received a warrant to purchase&nbsp;25&nbsp;shares
of our common stock at an exercise price of $8.00&nbsp;per share
for each $1,000 of senior notes purchased. The following of our
directors, executive officers and/or principal stockholders
participated in this transaction:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Andrews, our chairman, president 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&nbsp;6,250&nbsp;shares of our
    common stock. In addition, their children, Mark Andrews&nbsp;IV
    and Elizabeth Andrews, each purchased $125,000 of our senior
    notes and each were issued a warrant to
    purchase&nbsp;3,125&nbsp;shares of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    CNF Investments LLC, one of our principal stockholders,
    purchased $500,000 of our senior notes and was issued a warrant
    to purchase&nbsp;12,500&nbsp;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&nbsp;2,500&nbsp;shares of our
    common stock. Mr.&nbsp;Flanagan is the general partner of the
    Flanagan Family Limited Partnership;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Dr.&nbsp;Frost, one of our directors, is the trustee of the
    Frost Nevada Investment Trust, which purchased $1.0&nbsp;million
    of our senior notes and was issued a warrant to
    purchase&nbsp;25,000&nbsp;shares of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Lafferty Limited, one of our principal stockholders, purchased
    $500,000 of our senior notes and was issued a warrant to
    purchase&nbsp;12,500&nbsp;shares of our common stock;&nbsp;and</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Matthew MacFarlane, our senior vice president and chief
    financial officer, purchased $10,000 of our senior notes and was
    issued a warrant to purchase&nbsp;250&nbsp;shares of our common
    stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Options issued to directors and executive officers</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From August&nbsp;8, 2003 to September 27, 2005, pursuant to our
stock incentive plan, we granted to our current directors and
executive officers options to purchase an aggregate of
275,000&nbsp;shares of our common stock with exercise prices
ranging from $6.00 to $8.00&nbsp;per share.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation committee interlocks and insider
participation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None of the members of our compensation committee is, or has
been, one of our officers or employees or an officer or employee
of any of our subsidiaries. No member of our compensation
committee serves as a member of the board of directors or
compensation committee of any entity that has one or more
executive officers serving as a member of our board of directors
or compensation committee. Mark Andrews, our chairman, president
and chief executive officer, is a member of the board of
directors of IVAX Corporation and serves on its compensation
committee. Dr.&nbsp;Phillip Frost, one of our directors, is the
chief executive officer of IVAX.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='114'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows information with respect to the
beneficial ownership of shares of our common stock by the
following persons:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each of our directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each of our named executive officers (see &#147;Management
    &#150; Executive compensation&#148;);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each person known by us to beneficially own 5% of our common
    stock;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    all of our directors and executive officers as a group.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Beneficial ownership is determined under the rules of the
Securities and Exchange Commission and includes shares of our
common stock for which such person has voting or investment
power or shares which such person has the right to acquire under
existing stock options, warrants or convertible notes within
60&nbsp;days of September&nbsp;27, 2005. The same securities may
be beneficially owned by more than one person.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless indicated otherwise below, the address for each listed
director and officer is Castle Brands Inc., 570 Lexington
Avenue, 29th&nbsp;Floor, New York, New York 10022. Except as
indicated by footnote, to our knowledge, the persons and
entities named in the table have sole voting and investment
power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws
where applicable. In calculating the percentage for each listed
person or entity, the number of shares of common stock owned by
each listed person or entity includes the shares of common stock
underlying options, warrants or convertible notes held by that
person or entity that are exercisable within 60&nbsp;days of
September&nbsp;27, 2005, but excludes shares of common stock
underlying options, warrants or convertible notes held by any
other person or entity. Percentage of beneficial ownership
&#147;before offering&#148; is based on 8,450,493&nbsp;shares of
common stock outstanding as of September&nbsp;27, 2005 after
giving effect to the following issuances that will occur on or
prior to the closing of this offering:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the issuance of 4,089,465 shares of common stock upon the
    conversion of convertible preferred stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the issuance of 1,120,505 shares of common stock upon conversion
    of the convertible notes; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the issuance of 136,208 shares of common stock in payment of
    accrued dividends on our preferred stock through the estimated
    closing date of this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Percentage of beneficial ownership &#147;after offering&#148; is
based on 10,950,493&nbsp;shares of common stock outstanding
after giving effect to the issuances described above and the
number of shares of common stock to be issued in this offering.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Percentage beneficially owned</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>common stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Name and address of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>beneficially</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Before</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>After</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>beneficial owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>owned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>offering</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Andrews&nbsp;(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,214,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>11.1%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Knappogue Corp.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,183,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.8%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mellon HBV SPV LLC&nbsp;(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    200 Park Avenue, Suite&nbsp;3300</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    New York, NY 10166</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,321,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>15.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12.1%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Black River Global Credit Fund Ltd.&nbsp;(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    623 Fifth Avenue, 27th&nbsp;Floor</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    New York, NY 10022</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>660,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.8%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6.0%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">-83-

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Percentage beneficially owned</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>common stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Name and address of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>beneficially</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Before</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>After</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>beneficial owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>owned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>offering</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lafferty Limited&nbsp;(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    c/o Mr.&nbsp;Warren Roiter</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Roiter Zucker</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    5-7 Broadhurst Gardens</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Swiss Cottage</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    London NW6 3RZ, England</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>678,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>8.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6.2%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CNF Investments&nbsp;(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    c/o Clark Enterprises, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    7500 Old Georgetown Road</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    15th&nbsp;Floor</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bethesda, MD 20814</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>631,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.8%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Massachusetts Mutual Life Ins. Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    1295 State Street</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Springfield, MA 10111</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.9%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.6%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Carbery Milk Products Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ballineen Co. Cork, Ireland&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>541,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6.4%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.0%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Keith A. Bellinger&nbsp;(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Matthew F. MacFarlane&nbsp;(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>15,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David Phelan&nbsp;(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>325,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.9%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.0%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    T. Kelley Spillane&nbsp;(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John Beaudette&nbsp;(10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>19,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert J. Flanagan&nbsp;(11)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>648,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.9%</TD>
    <TD align="left" valign="top" nowrap>*</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Phillip Frost, MD&nbsp;(12)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>520,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.7%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Colm Leen&nbsp;(13)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Richard C. Morrison</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Frederick M. R. Smith&nbsp;(14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>45,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Kevin P. Tighe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>125,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.1%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All directors and executive officers as</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    a group (11 persons)&nbsp;(15)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2,594,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.4%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 41%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    Less than one percent</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Includes 1,183,699&nbsp;shares held by Knappogue Corp. Knappogue
    Corp is controlled by Mr.&nbsp;Andrews and his family.
    Mr.&nbsp;Andrews disclaims beneficial ownership of these shares,
    except to the extent of his pecuniary interest. Also includes
    10,000&nbsp;shares of common stock issuable upon exercise of
    options exercisable within 60&nbsp;days as of September&nbsp;27,
    2005; 12,500&nbsp;shares held jointly by Mr.&nbsp;Andrews&#146;
    with his wife and 6,250&nbsp;shares issuable upon exercise of
    warrants held jointly by Mr.&nbsp;Andrews with his wife that are
    exercisable within 60&nbsp;days as of September&nbsp;27, 2005.
    Does not include 90,000&nbsp;shares of common stock underlying
    options that are not exercisable within 60&nbsp;days as of
    September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Includes 750,000&nbsp;shares of common stock issuable upon
    conversion of $6.0 million principal amount of our
    6%&nbsp;convertible notes that are convertible within
    60&nbsp;days of September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    Includes 375,000&nbsp;shares of common stock issuable upon
    conversion of $3.0 million principal amount of our
    6%&nbsp;convertible notes that are convertible within
    60&nbsp;days of September&nbsp;27, 2005.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>(4)</TD>
    <TD align="left">
    Includes 12,500&nbsp;shares of common stock issuable upon
    exercise of warrants exercisable within 60&nbsp;days as of
    September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)</TD>
    <TD align="left">
    Includes 12,500&nbsp;shares of common stock issuable upon
    exercise of warrants exercisable within 60&nbsp;days as of
    September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)</TD>
    <TD align="left">
    Does not include 150,000&nbsp;shares of common stock underlying
    options that are not exercisable within 60&nbsp;days of
    September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)</TD>
    <TD align="left">
    Includes 2,500&nbsp;shares of common stock held jointly by
    Mr.&nbsp;MacFarlane and his wife. Also includes
    12,500&nbsp;shares of common stock issuable upon exercise of
    options exercisable with 60&nbsp;days of September&nbsp;27, 2005
    and 250&nbsp;shares of common stock issuable upon exercise of
    warrants exercisable within 60&nbsp;days as of
    September&nbsp;27, 2005. Does not include 47,500&nbsp;shares of
    common stock underlying options that are not exercisable within
    60&nbsp;days as of September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(8)</TD>
    <TD align="left">
    Includes 4,800&nbsp;shares of common stock issuable upon
    exercise of options exercisable within 60&nbsp;days as of
    September&nbsp;27, 2005. Does not include 19,200&nbsp;shares of
    common stock, underlying options that are not exercisable within
    60&nbsp;days as of September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(9)</TD>
    <TD align="left">
    Includes 15,000&nbsp;shares of common stock issuable upon
    exercise of options exercisable within 60&nbsp;days as of
    September&nbsp;27, 2005. Does not include 63,000&nbsp;shares of
    common stock underlying options that are not exercisable within
    60&nbsp;days as of September&nbsp;27, 2005.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>(10)</TD>
    <TD align="left">
    Includes 7,199&nbsp;shares held by BPW LLC, an entity of which
    Mr.&nbsp;Beaudette is a principal stockholder.
    Mr.&nbsp;Beaudette disclaims beneficial ownership of these
    shares except to the extent of his pecuniary interest. Also
    includes 12,000&nbsp;shares of common stock issuable upon
    exercise of options exercisable within 60&nbsp;days as of
    September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)</TD>
    <TD align="left">
    Includes 14,000&nbsp;shares of common stock issuable upon
    exercise of options exercisable within 60&nbsp;days as of
    September&nbsp;27, 2005. Also includes 2,500&nbsp;shares of
    common stock issuable upon exercise of warrants exercisable
    within 60&nbsp;days as of September&nbsp;27, 2005 that are held
    by the Flanagan Family Limited Partnership, an entity of which
    Mr.&nbsp;Flanagan is the general partner. Mr.&nbsp;Flanagan
    disclaims beneficial ownership of these shares except to the
    extent of his pecuniary interest. Also includes
    619,139&nbsp;shares held by CNF Investments LLC and
    12,500&nbsp;shares of common stock issuable upon exercise of
    warrants held by CNF Investments LLC that are exercisable within
    60&nbsp;days as of September&nbsp;27, 2005. Mr.&nbsp;Flanagan is
    a manager of CNF Investments LLC. Mr.&nbsp;Flanagan disclaims
    beneficial ownership of these shares except to the extent of his
    pecuniary interest.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)</TD>
    <TD align="left">
    Includes 25,000&nbsp;shares of common stock issuable upon
    exercise of warrants exercisable within 60&nbsp;days as of
    September&nbsp;27, 2005 that are held by the Frost Nevada
    Investment Trust, an entity of which Dr.&nbsp;Frost is the
    trustee. Dr.&nbsp;Frost disclaims beneficial ownership of these
    shares except to the extent of his pecuniary interest.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)</TD>
    <TD align="left">
    Includes 12,000&nbsp;shares of common stock issuable upon
    exercise of options exercisable within 60&nbsp;days of
    September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)</TD>
    <TD align="left">
    Includes 12,000&nbsp;shares of common stock issuable upon
    exercise of options exercisable within 60&nbsp;days of
    September&nbsp;27, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(15)</TD>
    <TD align="left">
    Includes 89,300&nbsp;shares of common stock issuable upon
    exercise of options, and 46,500&nbsp;shares of common stock
    issuable upon exercise of warrants, exercisable within
    60&nbsp;days of September&nbsp;27, 2005. Does not include
    369,700&nbsp;shares of common stock underlying options that are
    not exercisable within 60&nbsp;days of September&nbsp;27, 2005.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;">
<A name='115'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">DESCRIPTION OF SECURITIES</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DESCRIPTION OF SECURITIES</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation and bylaws will be amended and
restated on or prior to the closing of this offering. As a
result, upon the consummation of this offering, we will be
authorized to issue 45,000,000&nbsp;shares of common stock,
$.01&nbsp;par value, and 5,000,000&nbsp;shares of undesignated
preferred stock, $.01&nbsp;par value. As of the date of this
prospectus, we have 3,106,666&nbsp;shares of common stock
outstanding and 4,089,465&nbsp;shares of preferred stock
outstanding. Upon the consummation of this offering all of our
preferred stock and certain of our convertible notes will be
converted into common stock and we will issue shares of common
stock in payment of all of our accrued and unpaid dividends and,
following such conversion and payment of dividends, we will have
8,450,493&nbsp;shares of common stock outstanding, not including
the 2,500,000&nbsp;shares offered hereby, held of record by 188
stockholders, and no shares of preferred stock outstanding. The
following description of our capital stock is intended to be a
summary and does not describe all provisions of our amended and
restated certificate of incorporation or our amended and
restated bylaws or those of the Delaware General Corporation
Law, referred to as Delaware law, applicable to us. Throughout
this &#147;Description of Securities,&#148; references to our
certificate of incorporation and bylaws mean the amended and
restated certificate of incorporation and amended and restated
by laws, respectively. For a more thorough understanding of the
terms of our capital stock, you should refer to our amended and
restated certificate of incorporation and amended and restated
bylaws, which will be effective upon the closing of this
offering, forms of which are included as exhibits to the
registration statement of which this prospectus forms a part.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common stock</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of our common stock are entitled to one vote per
share on all matters to be voted upon by stockholders. There is
no cumulative voting. Subject to preferences that may be
applicable to any outstanding preferred stock, holders of our
common stock are entitled to receive ratably such dividends as
may be declared by our board of directors out of funds legally
available for that purpose. In the event of our liquidation,
dissolution or winding up, the holders of our common stock are
entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preferences of any
outstanding preferred stock. Holders of our common stock have no
preemptive or conversion rights or other subscription rights and
our common stock has no redemption or sinking fund provisions.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Preferred stock</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation authorizes our board of
directors, without any vote or action by the holders of our
common stock, to issue preferred stock from time to time in one
or more series. Our board of directors is authorized to
determine the number of shares and to fix the voting powers, if
any, designations, powers and preferences and the relative,
participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions of any series of
preferred stock. Issuances of preferred stock will be subject to
the applicable rules of the American Stock Exchange or other
organizations on which our securities are then quoted or listed.
Depending upon the terms of preferred stock established by our
board of directors, any or all series of preferred stock could
have preference over our common stock with respect to dividends
and other distributions and upon our liquidation. If any shares
of preferred stock are issued with voting powers, the voting
power of the outstanding common stock would be diluted.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>6%&nbsp;convertible notes</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;1, 2005, we entered into a convertible note
purchase agreement with an institutional investor, whereby we
agreed to issue up to $10.0&nbsp;million principal amount of
notes convertible into our common stock at a conversion price of
$8.00&nbsp;per share. We issued two notes each in the amount of
$5.0&nbsp;million to the institutional investor on March&nbsp;1,
2005 and June&nbsp;27, 2005. On August&nbsp;16, 2005, we amended
and restated the convertible note purchase agreement to
(a)&nbsp;increase the amount of loans under such agreement to
$15&nbsp;million and (b)&nbsp;provide for 40% of the outstanding
principal amount of
</DIV>

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<DIV align="left" style="font-size: 11pt;">
the notes to convert automatically into common stock upon an
initial public offering of our common stock at a conversion
price of $7.00 per share. Upon the consummation of this offering
and the conversion of $6.0&nbsp;million principal amount of our
6%&nbsp;convertible notes, we will have $9.0&nbsp;million
principal amount of our 6%&nbsp;convertible notes outstanding.
They bear interest at the rate of 6%&nbsp;per annum, payable
quarterly, at our option, in cash or in additional notes bearing
an interest rate of 7.5%&nbsp;per annum. We may not prepay our
6%&nbsp;convertible notes without the consent of the holders.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The outstanding balance of our 6%&nbsp;convertible notes may be
converted into common stock at any time at the option of the
holders at a conversion rate of $8.00&nbsp;per share and will
automatically convert at such time as the closing price of our
common stock is $20.00&nbsp;per share or more for thirty
consecutive days at any time after March&nbsp;1, 2008.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These 6%&nbsp;convertible notes are subject to customary
restrictive covenants. In addition, for as long as there is at
least $1.5&nbsp;million aggregate principal amount outstanding
under our 6%&nbsp;convertible notes (a)&nbsp;the approval of
holders of at least a majority of the aggregate principal amount
of the 6%&nbsp;convertible notes outstanding is required before
we may pay dividends or make a distribution or payment on our
equity securities or redeem or repurchase our equity securities
(other than repurchases from employees upon termination of their
employment) and (b)&nbsp;the approval of holders of at least
seventy percent of the aggregate principal amount of the
6%&nbsp;convertible notes outstanding is required before we may
engage in a transaction with an affiliate or incur indebtedness
in excess of $30.0&nbsp;million; provided, however, that the
indebtedness covenant will no longer be applicable if the
product of our fully diluted securities multiplied by the
average of the highest bid and lowest asked prices on the
exchange or over-the-counter quotation system on which our
common stock is listed is at least $100.0&nbsp;million for a
period of at least 90&nbsp;days. The limit on indebtedness does
not include indebtedness that is incurred in connection with the
acquisition of a brand related to, or an entity doing business
in or related to, the beverage alcohol market, to the extent
such indebtedness (including costs and fees associated with
incurring such debt) does not exceed an amount equal to three
times the target&#146;s earnings before interest, taxes,
depreciation and amortization.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As long as both holders of our 6%&nbsp;convertible notes hold at
least 5% of our capital stock (on an as converted basis), each
has the right to have a representative attend the meetings of
our board of directors as an observer.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Options</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September 27, 2005, we had 878,500&nbsp;shares of common
stock reserved for issuance upon the exercise of outstanding
stock options granted under our stock incentive plan, with
exercise prices ranging from $6.00 to $8.00&nbsp;per share, and
up to 1,121,500 additional shares of common stock reserved for
issuance upon the exercise of options that may be granted under
our stock incentive plan in the future. As of September 27,
2005, we also had 10,000&nbsp;shares of common stock reserved
for issuance upon the exercise of non-plan stock options, with
an exercise price of $6.00&nbsp;per share. For a more complete
discussion of our stock incentive plan, see
&#147;Management&nbsp;&#151; 2003 stock incentive plan.&#148;
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Warrants</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September 27, 2005, we had outstanding warrants
exercisable for the purchase of up to 598,618&nbsp;shares of
common stock at exercise prices ranging from $6.00 to
$8.00&nbsp;per share. As of September 27, 2005 all of these
warrants were immediately exercisable.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Registration rights</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of all of the 8,450,493&nbsp;shares of our common
stock that will be outstanding upon the consummation of this
offering, not including the 2,500,000&nbsp;shares offered
hereby, as well as the holders of warrants to
purchase&nbsp;598,618&nbsp;shares of our common stock and the
holders of our 6%&nbsp;convertible notes due in 2010, will be
entitled to &#147;piggyback&#148; registration rights, which
entitle the holder to include the holder&#146;s registrable
securities in any registration statement filed by us after the
</DIV>

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<DIV align="left" style="font-size: 11pt;">
closing of this offering under the Securities Act of 1933, as
amended, covering the sale of our securities. The
&#147;piggyback&#148; registration rights are subject to certain
standard limitations, including, in the event the registration
statement relates to an underwritten public offering, the right
of our underwriters to reduce the number of shares proposed to
be registered ratably in view of market conditions. We will bear
all expenses (exclusive of all underwriting discounts and
commissions) of all piggyback registrations. The piggyback
registration rights will terminate, with respect to certain of
the foregoing holders, on the later of the second anniversary of
the effective date of this registration statement and the date
on which the holder is no longer an &#147;affiliate&#148; under
Rule&nbsp;144 of the Securities Act, and, with respect to the
other holders, on the second anniversary of the effective date
of this registration statement. These registration rights may
not be used in connection with the registration of our
securities in a Rule&nbsp;145 transaction or relating solely to
employee benefit plans.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our Amended and Restated Warrant Agreement
with Keltic Financial Partners, LP for the purchase of
100,000&nbsp;shares of our common stock, we have agreed that if
on June&nbsp;1, 2007 or June&nbsp;1, 2008 (a)&nbsp;there are
shares of common stock received or issuable upon the exercise of
the warrant that have not been registered and (b)&nbsp;we have
not filed a registration statement with respect to which Keltic
had the opportunity to register such unregistered shares, we
will pay Keltic $100,000 within ten (10)&nbsp;days of such date.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Anti-takeover considerations</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I> General</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation, our bylaws and the Delaware
law contain provisions that could delay or make more difficult
an acquisition of control of our company not approved by our
board of directors, whether by means of a tender offer, open
market purchases, a proxy contest or otherwise. These provisions
have been implemented to enable us, particularly, but not
exclusively, in the initial years of our existence as a publicly
owned company, to develop our business in a manner that will
foster our long-term growth without disruption caused by the
threat of a takeover not deemed by our board of directors to be
in the best interests of our company and our stockholders. These
provisions could have the effect of discouraging third parties
from making proposals involving an acquisition or change of
control of our company even if such a proposal, if made, might
be considered desirable by a majority of our stockholders. These
provisions may also have the effect of making it more difficult
for third parties to cause the replacement of our current
management without the concurrence of our board of directors.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is a description of the provisions contained in
our certificate of incorporation and bylaws and the Delaware law
that could impede or delay an acquisition of control of our
company that our board of directors has not approved. This
description is intended as a summary only and is qualified in
its entirety by reference to our certificate of incorporation
and bylaws, forms of each of which are included as exhibits to
the registration statement of which this prospectus forms a
part, as well as the Delaware law.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I> Authorized but unissued preferred stock</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation authorizes our board of
directors to issue one or more series of preferred stock and to
determine, with respect to any series of preferred stock, the
terms and rights of such series without any vote or action by
the holders of our common stock. The existence of authorized but
unissued shares of preferred stock may enable our board of
directors to render more difficult or discourage an attempt to
obtain control of our company by means of a proxy contest,
tender offer or other extraordinary transaction. Any issuance of
preferred stock with voting and conversion rights may adversely
affect the voting power of the holders of our common stock,
including the loss of voting control to others. The existence of
authorized but unissued shares of preferred stock will also
enable our board of directors, without stockholder approval, to
adopt a &#147;poison pill&#148; takeover defense mechanism. We
have no present plans to issue any shares of preferred stock.
</DIV>

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I> Number of directors; removal; filling vacancies</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation and bylaws provide that the
number of directors shall be fixed only by resolution of our
board of directors from time to time. Our bylaws provide that
directors may be removed, with or without cause, by stockholders
by the affirmative vote of at least a majority of the shares
entitled to vote at an annual or a special meeting called for
that purpose. Our certificate of incorporation and bylaws
provide that vacancies on our board of directors may be filled
only by a majority vote of the remaining directors.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I> Stockholder action</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation provides that stockholder
action may be taken only at an annual or special meeting of
stockholders. This provision prohibits stockholder action by
written consent in lieu of a meeting. Our bylaws further provide
that special meetings of stockholders may be called only by our
board of directors, the chairman of our board of directors or
our chief executive officer. Stockholders are not permitted to
call a special meeting or to require our board of directors to
call a special meeting of stockholders.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The provisions of our certificate of incorporation and bylaws
prohibiting stockholder action by written consent may have the
effect of delaying consideration of a stockholder proposal until
the next annual meeting unless a special meeting is called as
provided above. These provisions would also prevent the holders
of a majority of the voting power of our stock from unilaterally
using the written consent procedure to take stockholder action.
Moreover, a stockholder could not force stockholder
consideration of a proposal over the opposition of the board of
directors by calling a special meeting of stockholders prior to
the time our chairman, our board of directors or our chief
executive officer believes the consideration to be appropriate.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I> Advance notice for stockholder proposals and director
nominations</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bylaws establish an advance notice procedure for stockholder
proposals to be brought before any annual or special meeting of
stockholders and for nominations by stockholders of candidates
for election as directors at an annual meeting or a special
meeting at which directors are to be elected. Subject to any
other applicable requirements, including, without limitation,
Rule&nbsp;14a-8 under the Securities Exchange Act of 1934, only
such business may be conducted at a meeting of stockholders as
has been brought before the meeting by, or at the direction of,
our board of directors, or by a stockholder who has given our
Secretary timely written notice, in proper form, of the
stockholder&#146;s intention to bring that business before the
meeting. The chairman of the meeting has the authority to make
such determinations. Only persons who are nominated by, or at
the direction of, our board of directors, or who are nominated
by a stockholder that has given timely written notice, in proper
form, to our Secretary prior to a meeting at which directors are
to be elected, will be eligible for election as directors.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I> Amendments to bylaws</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation provides that only our board of
directors has the power to amend or repeal our bylaws.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I> Amendments to certificate of incorporation</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any proposal to amend, alter, change or repeal any provision of
our certificate of incorporation requires approval by the
affirmative vote of a majority of the voting power of all of the
shares of our capital stock entitled to vote on such amendment
or repeal, voting together as a single class, at a duly
constituted meeting of stockholders called expressly for that
purpose.
</DIV>

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I> Delaware statutory provisions</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to the provisions of Section&nbsp;203 of the
Delaware law regulating corporate takeovers. This section
prevents Delaware corporations, under certain circumstances,
from engaging in a &#147;business combination&#148; with:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="2%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a stockholder who owns 15% or more of our outstanding voting
    stock (otherwise known as an interested stockholder);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an affiliate of an interested stockholder; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an associate of an interested stockholder;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
for three years following the date that the stockholder became
an interested stockholder. A &#147;business combination&#148;
includes a merger or sale of more than 10% of our assets.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
However, the above provisions of Section&nbsp;203 do not apply
if:
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="2%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our board of directors approves the transaction that made the
    stockholder an interested stockholder, prior to the date of that
    transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This statute could prohibit or delay mergers or other change in
control attempts, and thus may discourage attempts to acquire us.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Limitation of liability and indemnification of officers and
directors</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation and bylaws limit the liability
of directors to the fullest extent permitted by the Delaware
law. In addition, they provide that we will indemnify our
directors and officers to the fullest extent permitted by law.
In connection with this offering, we are entering into
indemnification agreements with our current directors and
executive officers and expect to enter into a similar agreement
with any new directors or executive officers.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transfer agent and registrar</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the closing of this offering, the transfer agent and
registrar for our common stock will be Continental Stock
Transfer &#38; Trust Company, New York, NY.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Listing</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect that as of the date of this prospectus our common
stock will be approved for quotation on the American Stock
Exchange under the symbol &#147;ROX.&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='116'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">SHARES ELIGIBLE FOR FUTURE SALE</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SHARES ELIGIBLE FOR FUTURE SALE</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
common stock. We cannot predict the effect, if any, that market
sales of shares, or the availability of shares for sale, will
have on the market price of our common stock prevailing from
time to time. Sales of our common stock in the public market
after the restrictions described below lapse, or the perception
that those sales may occur, could cause the prevailing market
price to decline or to be lower than it might be in the absence
of those sales or perceptions.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Sale of restricted shares</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, we will have
10,950,493&nbsp;shares of common stock outstanding, based on the
3,106,666&nbsp;shares outstanding as of September&nbsp;27, 2005,
the 5,209,970&nbsp;shares to be issued upon the conversion of
our preferred stock and certain of our convertible notes upon
the consummation of this offering, the 133,857 shares of our
common stock to be issued in payment of accrued and unpaid
dividends on our preferred stock and the 2,500,000&nbsp;shares
offered hereby. Of these shares, the shares sold in this
offering, plus any shares sold upon exercise of the
underwriters&#146; over-allotment option, will be freely
tradable without restriction under the Securities Act, except
for any shares purchased by our &#147;affiliates&#148; as that
term is defined in Rule&nbsp;144 under the Securities Act. In
general, affiliates include executive officers, directors, and
10% stockholders. Shares purchased by affiliates will remain
subject to the resale limitations of Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The other 8,450,493&nbsp;shares that will be outstanding
following this offering are restricted securities within the
meaning of Rule&nbsp;144. Restricted securities may be sold in
the public market only if registered or if they qualify for an
exemption from registration under Rules&nbsp;144, 144(k)
or&nbsp;701 promulgated under the Securities Act, which are
summarized below.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Taking into account the lock-up agreements described below, and
assuming Oppenheimer&nbsp;&#38; Co. Inc. does not release shares
from these agreements, the following shares will be eligible for
sale in the public market at the following times:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    beginning 180&nbsp;days after the effective date of the
    registration statement of which this prospectus forms a part,
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    will be eligible for sale pursuant to Rule&nbsp;144(k), none of
    which are held by affiliates, and
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
    shares held by affiliates will be eligible for sale subject to
    volume, manner of sale, and other limitations under
    Rule&nbsp;144.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Lock-up agreements</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our directors, executive officers and holders of substantially
all of our common stock and derivative securities have entered
into lock-up agreements in connection with this offering,
generally providing that they will not offer, sell, contract to
sell, or grant any option to purchase or otherwise dispose of
our common stock or any securities exercisable for or
convertible into our common stock owned by them for a period of
180&nbsp;days after the date of this prospectus without the
prior written consent of Oppenheimer&nbsp;&#38; Co. Inc., as
representative of the underwriters. Despite possible earlier
eligibility for sale under the provisions of Rules&nbsp;144,
144(k) and 701, shares subject to lock-up agreements will not be
salable until these agreements expire or are waived by the
representative. These agreements are more fully described in
&#147;Underwriting.&#148;
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have been advised by the representative that it may in its
discretion waive the lock-up agreements; however, it has no
current intention of releasing any shares subject to a lock-up
agreement. The release of any lock-up would be considered on a
case-by-case basis. In considering any request to release shares
covered by a lock-up agreement, the representative would
consider circumstances of
</DIV>

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<DIV align="left" style="font-size: 11pt;">
emergency and hardship. No agreement has been made between the
underwriters and us or any of our stockholders pursuant to which
the representative will waive the lock-up restrictions.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;144</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;144 as currently in effect, a person
who has beneficially owned restricted securities for at least
one year would be entitled to sell within any three-month period
a number of shares that does not exceed the greater of the
following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="10%"></TD>
    <TD width="2%"></TD>
    <TD width="88%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    1% of the number of shares of common stock then
    outstanding;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the average weekly trading volume of the common stock during the
    four calendar weeks preceding the filing of a notice on
    Form&nbsp;144 with respect to such sale.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales under Rule&nbsp;144 are also subject to requirements with
respect to manner of sale, notice, and the availability of
current public information about us.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;144(k)</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Rule&nbsp;144(k), a person who is not deemed to have been
one of our affiliates at any time during the three months
preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, is entitled to sell
his or her shares without complying with the manner of sale,
public information, volume limitation or notice provisions of
Rule&nbsp;144. Therefore, unless otherwise restricted pursuant
to the lock-up agreements or otherwise, those shares may be sold
immediately upon the completion of this offering.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;701</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Rule&nbsp;701 as currently in effect, each of our
employees, officers, directors and consultants who purchased
shares pursuant to a written compensatory plan or contract is
eligible to resell these shares 90&nbsp;days after the effective
date of this offering in reliance upon Rule&nbsp;144, but
without compliance with specific restrictions. Rule&nbsp;701
provides that affiliates may sell their
Rule&nbsp;701&nbsp;shares under Rule&nbsp;144 without complying
with the holding period requirement and that non-affiliates may
sell their shares in reliance on Rule&nbsp;144 without complying
with the holding period, public information, volume limitation
or notice provisions of Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Form&nbsp;S-8 registration statements</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to file one or more registration statements on
Form&nbsp;S-8 under the Securities Act as soon as practicable
after the completion of this offering for shares issued upon the
exercise of options and shares to be issued under our employee
benefit plans. As a result, any options or rights exercised
under the stock incentive plan or any other benefit plan after
the effectiveness of the registration statements will also be
freely tradable in the public market. However, such shares held
by affiliates will still be subject to the volume limitation,
manner of sale, notice and public information requirements of
Rule&nbsp;144 unless otherwise resalable under Rule&nbsp;701.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Registration rights</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Beginning six months after the consummation of this offering,
holders of the 8,450,493 restricted shares of our common stock,
warrants to purchase 598,618&nbsp;shares of common stock and
6%&nbsp;convertible notes convertible into 1,125,000&nbsp;shares
of our common stock will be entitled to piggyback registration
rights with respect to these shares for sale in the public
market. See &#147;Description of Securities&nbsp;&#151;
registration rights.&#148; Registration of these shares under
the Securities Act would result in their becoming freely
tradable without restriction under the Securities Act
immediately upon effectiveness of the applicable registration
statement.
</DIV>

<P align="center" style="font-size: 11pt;">-92-

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='117'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">UNDERWRITING</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNDERWRITING</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into an underwriting agreement with the
underwriters listed below with respect to the shares of our
common stock being offered in this offering. In accordance with
the terms and conditions contained in the underwriting
agreement, we have agreed to sell to each of the listed
underwriters, and each of the listed underwriters, for which
Oppenheimer&nbsp;&#38; Co. Inc. is acting as representative,
have severally, and not jointly, agreed to purchase from us on a
firm commitment basis, the number of shares offered in this
offering set forth opposite their respective names below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Underwriters</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Shares</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Oppenheimer&nbsp;&#38; Co. Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ThinkEquity Partners LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ladenburg Thalmann&nbsp;&#38; Co. Inc.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="6">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,500,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A copy of the underwriting agreement has been filed as an
exhibit to the registration statement of which this prospectus
forms a part.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have been advised by the representative that the underwriters
propose to offer the shares directly to the public at the public
offering price set forth on the cover page of this prospectus.
Any shares sold by the underwriters to securities dealers will
be sold at the public offering price less a selling concession
not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The underwriters may allow, and these selected dealers
may re-allow, a concession of not more than
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to other brokers and dealers.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriting agreement provides that the underwriters&#146;
obligations to purchase shares are subject to conditions
contained in the underwriting agreement. The underwriters are
obligated to purchase and pay for all of the shares offered by
this prospectus, other than those covered by the over-allotment
option described below (unless and until that option is
exercised), if any of these shares are purchased.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No action has been taken by us or the underwriters that would
permit a public offering of the shares offered hereby in any
jurisdiction where action for that purpose is required. None of
our shares included in this offering may be offered or sold,
directly or indirectly, nor may this prospectus or any other
offering material or advertisements in connection with the offer
and sales of the shares be distributed or published in any
jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of that
jurisdiction. Persons who receive this prospectus are advised to
inform themselves about and to observe any restrictions relating
to this offering of our shares and the distribution of this
prospectus. This prospectus is neither an offer to sell nor a
solicitation of any offer to buy any of the securities included
in this offering in any jurisdiction where that would not be
permitted or legal.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters have advised us that they do not expect sales
to discretionary accounts to exceed five percent of the total
number of shares offered.
</DIV>

<P align="center" style="font-size: 11pt;">-93-

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<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Underwriting discount and expenses</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes the underwriting discount to be
paid to the underwriters by us:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total, with no</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total, with full</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>over-allotment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>over-allotment</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting discount to be paid to the underwriters by us for
    the shares offered</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have agree to pay to the representative, on behalf of the
underwriters, a non-accountable expense allowance equal to
$125,000, of which $50,000 has been paid by us as of the date of
this prospectus. We have also agreed to pay all expenses in
connection with qualifying the shares offered hereby under the
laws of the states designated by the underwriters, including
expenses of counsel retained for this purpose by the
underwriters. We have also agreed to pay the fees of counsel
retained by the underwriters for purposes of filing this
offering with the NASD, with such fees estimated not to exceed
$5,000. We estimate the expenses payable by us for this offering
to be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
including the underwriting discount and the underwriters&#146;
non-accountable expense allowance, or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;if
the underwriters&#146; over-allotment option is exercised in
full.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Over-allotment option</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have granted to the underwriters an option, exercisable not
later than 30&nbsp;days after the date of this prospectus, to
purchase up to 375,000 additional shares, identical to the
shares offered hereby, at the public offering price, less the
underwriting discount, set forth on the cover page of this
prospectus. The underwriters may exercise the option solely to
cover over-allotments, if any, made in connection with this
offering. If any shares are purchased pursuant to the
over-allotment option, the underwriters will offer these
additional shares on the same terms as those on which the other
shares ore being offered hereby. If any shares are purchased
pursuant to this over-allotment option, the underwriters will
severally purchase shares in approximately the same proportion
as set forth in the table above.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Lock-ups</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any shares or
our common stock or securities convertible into or exchangeable
or exercisable for any shares of our common stock, or publicly
disclose the intention to make any offer, sale, pledge,
disposition or filing, without the prior written consent of the
representative of the underwriters, for a period of
180&nbsp;days after the date of this prospectus. This agreement
does not apply to the filing of a registration statement on
Form&nbsp;S-8 under the Securities Act to register securities
issuable under our existing employee benefit plans, our issuance
of common stock upon exercise of an existing option or our
granting of awards pursuant to our existing employee benefit
plans (subject to the lock-up restrictions described below).
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our officers, directors and holders of substantially all of our
common stock and derivative securities have agreed that they
will not, other than as contemplated by this prospectus, offer,
sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, enter into a transaction that would have
the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of our common stock, whether
any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or
publicly disclose, unless required by law, the intention to make
any offer, sale, pledge or disposition, or to enter into any
transaction, swap, hedge or other arrangement, without, in each
case, the prior written consent of the representative for a
period of 180&nbsp;days after the date of this prospectus. These
agreements are subject to several exceptions.
</DIV>

<P align="center" style="font-size: 11pt;">-94-
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Reserved share program</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At our request, the underwriters have reserved for sale at the
initial public offering price up to 5%, or 125,000, of the
shares of our common stock offered in this offering for sale to
our directors, officers, employees, business associates and
related persons who have expressed an interest in purchasing
common stock in the offering. The 125,000 reserved shares will
be allocated by us among the participants in the reserved share
program in such amounts as we may determined in our sole
discretion. Individuals who purchase these shares will be
subject to a 45-day lock-up period on such shares. The number of
shares available for sale to the general public in the offering
will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same
terms as the other shares.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Determination of offering price</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the offering, there has been no public market for our
common stock. The initial public offering price of the shares
offered hereby will be determined by negotiation among us and
the representative of the underwriters. The principal factors to
be considered in determining the initial public offering price
of the shares will include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the information set forth in this prospectus and otherwise
    available to the underwriters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our history and the history of the industry in which we compete;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our past and present financial performance and an assessment of
    our management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    estimates of our business potential and earnings prospects;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the general condition of the securities market at the time of
    this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the recent market prices of, and demand for, publicly traded
    common stock of generally comparable companies;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    other factors deemed relevant by us and the representative.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stabilization, short positions and penalty bids</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with this offering, the underwriters may engage in
over-allotment, syndicate covering transactions, stabilizing
transactions and penalty bids or purchases for the purpose of
pegging, fixing or maintaining the price of our common stock, as
described below:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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
    &#147;covered&#148; short position or a &#147;naked short&#148;
    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-allotment option, in whole or in part, or
    purchasing shares of our common stock in the open market;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">-95-

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">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;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 11pt">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">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;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 11pt">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">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.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These syndicate covering transactions, stabilizing transactions
and penalty bids may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding
a decline in the market prices of our common stock. As a result,
the prices of our shares may be higher than the price that might
otherwise exist for such shares in the open market. These
transactions may be effected on the American Stock Exchange, in
the over-the-counter market or otherwise and, if commenced, may
be discontinued at any time.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither we nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that
the transactions described above may have on the prices of our
common stock. In addition, neither we nor the underwriters make
any representation that the underwriters will engage in these
stabilizing transactions or that any transaction, once
commenced, will not be discontinued without notice.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Indemnification</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities
Act, and/or to contribute to payments the underwriters may be
required to make with respect to any of these liabilities.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Electronic delivery</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A prospectus in electronic format may be made available on the
websites maintained by one or more of the underwriters, or
selling group members, if any, participating in this offering
and one or more of the underwriters participating in this
offering may distribute prospectuses electronically. The
representative may agree to allocate a number of shares to
underwriters and selling group members for sale to their own
online brokerage account holders. Internet distributions will be
allocated by the underwriters and selling group members that
will make internet distributions on the same basis as other
allocations.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Other relations with the underwriters</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the underwriters and their respective affiliates
have, from time to time, performed, and may in the future
perform, various financial advisory and investment banking
services for our company and our affiliates, for which they
received or will receive customary fees and expenses.
</DIV>

<P align="center" style="font-size: 11pt;">-96-

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='118'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">LEGAL MATTERS</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LEGAL MATTERS</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The validity of the common stock in this offering will be passed
upon for us by Patterson Belknap Webb&nbsp;&#38; Tyler LLP, New
York, NY. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Blank Rome LLP, New
York, NY.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">EXPERTS</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXPERTS</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements of Castle Brands Inc. as of
March&nbsp;31, 2004 and 2005, and for each of the fiscal years
ending March&nbsp;31, 2003, 2004 and 2005, as set forth in their
report, have been included herein and in the Registration
Statement in reliance upon the report of Eisner LLP, independent
registered public accounting firm, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and
auditing.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements of the Castle Brands Spirits Company
Limited (formerly known as the Roaring Water Bay Spirits Company
Limited) and of The Roaring Water Bay Spirits Company
(GB)&nbsp;Limited included in this prospectus and in the
Registration Statement have been audited by BDO Simpson Xavier,
an independent registered public accounting firm, to the extent
and for the periods set forth in their reports appearing
elsewhere herein and in the Registration Statement, and are
included in reliance upon such reports given upon the authority
of said firm as experts in accounting and auditing.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='120'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">WHERE YOU CAN FIND ADDITIONAL INFORMATION</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>WHERE YOU CAN FIND ADDITIONAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed a registration statement on Form&nbsp;S-1 with the
Securities and Exchange Commission relating to the common stock
offered by this prospectus. This prospectus does not contain all
of the information set forth in the registration statement and
the exhibits and schedules to the registration statement.
Statements contained in this prospectus as to the contents of
any contract or other document referred to are not necessarily
complete and in each instance we refer you to the copy of the
contract or other document filed as an exhibit to the
registration statement, each such statement being qualified in
all respects by such reference. For further information with
respect to our company and the common stock offered by this
prospectus, we refer you to the registration statement,
exhibits, and schedules.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Anyone may inspect a copy of the registration statement without
charge at the public reference facility maintained by the SEC in
Room&nbsp;1580, 100&nbsp;F&nbsp;Street, N.E.,
Washington,&nbsp;D.C. 20549. Copies of all or any part of the
registration statement may be obtained from that facility upon
payment of the prescribed fees. The public may obtain
information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. The SEC maintains a website
at http://www.sec.gov that contains reports, proxy and
information statements, and other information regarding
registrants that file electronically with the SEC.
</DIV>

<P align="center" style="font-size: 11pt;">-97-
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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='121'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">INDEX TO FINANCIAL STATEMENTS</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEX TO FINANCIAL STATEMENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Page</B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Report of Independent Registered Public Accounting Firm</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#204'>Consolidated Balance Sheets as of
    March&nbsp;31, 2004 and 2005 and as of June&nbsp;30, 2005
    (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#205'>Consolidated Statements of Operations for
    each of the years in the three year period ended March&nbsp;31,
    2005 and for the </A> three-months ended June&nbsp;30, 2004 and
    2005 (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#206'>Consolidated Statements of Changes in
    Stockholders Equity (Deficiency) for each of the years in the
    three year period ended March&nbsp;31, 2005 and for the
    three-months ended June&nbsp;30, 2005 (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#207'>Consolidated Statements of Cash Flows for
    each of the years in the three year period ended March&nbsp;31,
    2005 and for the three-months ended June&nbsp;30, 2004 and 2005
    (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#208'>Notes to Consolidated Financial
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#304'>Report of Independent Registered Public
    Accounting Firm</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#306'>Profit and Loss Accounts for the years
    ended December&nbsp;31, 2003 and 2002 for The Castle Brands
    Spirits Company Limited (formerly known as The Roaring Water Bay
    Spirits Company Limited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#307'>Balance Sheets as of December&nbsp;31, 2003
    and 2002 for The Castle Brands Spirits Company Limited (formerly
    known as The Roaring Water Bay Spirits Company Limited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#308'>Cash Flow Statement for the years ended
    December&nbsp;31, 2003 and 2002 for The Castle Brands Spirits
    Company Limited (formerly known as The Roaring Water Bay Spirits
    Company Limited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-51</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#309'>Notes to Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-52</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#404'>Report of Independent Registered Public
    Accounting Firm</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-70</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#406'>Profit and Loss Accounts for the years
    ended December&nbsp;31, 2003 and 2002 for The Roaring Water Bay
    Spirits Company (GB)&nbsp;Limited</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#407'>Balance Sheets as of December&nbsp;31, 2003
    and 2002 for The Roaring Water Bay Spirits Company
    (GB)&nbsp;Limited</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#407'>Notes to Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#304'>Report of Independent Registered Public
    Accounting Firm</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reconciliation of Castle Brands Spirits Company Limited
    Financial Statements to U.S.&nbsp;GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reconciliation of the Roaring Water Bay Spirits Company (GB)
    Limited to U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-83</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 11pt;">F-1
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='203'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT>" -->

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
Castle Brands Inc.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying consolidated balance sheets of
Castle Brands Inc. and subsidiaries as of March&nbsp;31, 2004
and 2005, and the related consolidated statements of operations,
stockholders&#146; equity (deficiency) and cash flows for each
of the years in the three year period ended March 31, 2005. Our
audits also included the financial statement schedule listed at
Item&nbsp;16(b). These financial statements and schedule are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, the financial statements enumerated above
present fairly, in all material respects, the consolidated
financial position of Castle Brands Inc. and subsidiaries as of
March&nbsp;31, 2004 and 2005, and the consolidated results of
their operations and their consolidated cash flows for each of
the years in the three year period ended March 31, 2005 in
conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related
consolidated financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 60pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT style="font-variant:SMALL-CAPS">Eisner
LLP
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Eisner LLP
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
New York, New York
</DIV>

<DIV align="left" style="font-size: 10pt;">
September&nbsp;9, 2005
</DIV>

<P align="center" style="font-size: 11pt;">F-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='204'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CASTLE BRANDS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS</FONT>" -->

<DIV align="center" style="font-size: 7pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS INC. AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<B>CONSOLIDATED BALANCE SHEETS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance Sheet</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(Note&nbsp;1D)</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(Unaudited)</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Unaudited)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CURRENT ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,461,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,676,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,031,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,546,535</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable&nbsp;- net of allowance for doubtful
    accounts of $57,772, $80,847 and $92,576</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,005,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,614,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,573,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,573,728</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due from related parties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>355,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>641,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>641,492</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,696,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,496,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,430,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,430,076</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>371,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>326,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>663,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>663,090</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>TOTAL CURRENT ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,534,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,470,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,339,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,854,921</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>EQUIPMENT</B>&nbsp;-&nbsp;net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>258,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>350,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>336,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>336,089</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>OTHER ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets&nbsp;- net of accumulated amortization of
    $303,503, $318,698 and $459,478</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,447,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,475,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,351,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,351,681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,305,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,756,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,759,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,759,359</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>387,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361,993</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>816,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>806,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>806,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>TOTAL ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>27,758,832</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>43,255,009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>43,955,169</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>51,470,262</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="18" align="left" valign="top">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY (DEFICIENCY)</B></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CURRENT LIABILITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of notes payable and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,335,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,032,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,965,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,965,391</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,866,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,682,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,963,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,963,674</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due to related parties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>347,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,610,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,248,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,248,031</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholder loans payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>197,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142,366</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>TOTAL CURRENT LIABILITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,747,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,481,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,319,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,319,462</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>LONG TERM LIABILITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior notes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,561,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,570,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,570,706</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable, less current maturities and obligations under
    capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>595,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,678,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,644,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,644,031</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholder loans payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>292,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,640</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Convertible shareholder loans payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,674,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,775,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,658,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock dividends payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>681,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>752,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>752,707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>629,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,851,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,814,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,814,629</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>TOTAL LIABILITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,259,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,187,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,911,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,253,175</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>REDEEMABLE CONVERTIBLE PREFERRED STOCK</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Redeemable convertible preferred stock Series&nbsp;A, B, C;
    4,103,750&nbsp;shares designated; 2,804,465&nbsp;shares issued
    and outstanding at March&nbsp;31, 2004, 3,741,965 at
    March&nbsp;31, 2005 and 3,741,985 at June&nbsp;30, 2005,
    liquidation preference of $21,731,285, $29,681,285 and
    $29,752,713</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,328,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,958,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,926,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>COMMITMENTS AND CONTINGENCIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>MINORITY INTERESTS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,330,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,201,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,201,518</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>STOCKHOLDERS&#146; EQUITY (DEFICIENCY)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $.01&nbsp;par value, 20,500,000&nbsp;shares
    authorized, 3,106,666&nbsp;shares issued and outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,956,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,012,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,965,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,011,035</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficiency</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,776,961</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,071,286</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,180,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,180,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive (loss)/ income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(41,946</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(194,573</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,023</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>TOTAL STOCKHOLDERS&#146; EQUITY (DEFICIENCY)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,222,147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,084,315</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,015,569</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY
    (DEFICIENCY)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>27,758,832</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>43,255,009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>43,955,169</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>51,470,262</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 7pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the consolidated financial statements.
</DIV>

<P align="center" style="font-size: 11pt;">F-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS INC. AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='205'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CONSOLIDATED STATEMENTS OF OPERATIONS</FONT>" -->

<DIV align="center" style="font-size: 11pt;">
<B>CONSOLIDATED STATEMENTS OF OPERATIONS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>(Unaudited)</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,419,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,826,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,617,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,163,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,498,473</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,427,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,285,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,744,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,482,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,647,272</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>991,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,541,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,873,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>680,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,851,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,348,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,397,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,568,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,977,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,225,382</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>817,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,960,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,636,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>795,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,137,477</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182,385</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other (income)/expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(198,755</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322,426</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss before interest expense, net, income tax benefit
    and minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,258,226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,155,800</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,300,950</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,141,781</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,016,469</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(182,494</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(303,516</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(998,096</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(465,740</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(258,930</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,037</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,159</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,440,720</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,423,977</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,294,325</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,605,456</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,109,203</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>525,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,428</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,455,680</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,981,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,819,930</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,691,844</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,180,631</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common stockholders per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares used in computation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,840,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,236,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,106,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,106,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,106,666</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,840,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,236,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,106,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,106,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,106,666</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the consolidated financial statements.
</DIV>

<P align="center" style="font-size: 11pt;">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='206'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CASTLE BRANDS INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders&#146; Equity (Deficiency)</FONT>" -->

<DIV align="center" style="font-size: 7pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS INC. AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<B>Consolidated Statements of Changes in Stockholders&#146;
Equity (Deficiency)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Membership</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Interests</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Common Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stockholders&#146;</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equity</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deficiency</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income/(Loss)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Deficiency)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>BALANCE, MARCH&nbsp;31, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>325,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,912,264</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>987,736</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,440,720</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,440,720</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of membership interests, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,109,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,109,040</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Conversion of common<BR>
    shares to Series&nbsp;B preferred<BR>
    shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(40,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,086,339</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,086,339</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued preferred dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(14,960</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,960</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>BALANCE, MARCH&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>360,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,922,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,960</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,352,984</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,445,243</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,423,977</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,423,977</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency<BR>
    translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(41,946</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(41,946</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,465,923</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Value ascribed to warrants issued in<BR>
    connection with asset based loan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>282,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>282,295</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange of LLC membership<BR>
    interests for common shares and<BR>
    1-for-5 stock split</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(360,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,922,701</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,904,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Warrants issued<BR>
    in connection with<BR>
    business acquisition</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common shares in connection<BR>
    with business acquisition</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,306,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,826,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,840,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Value ascribed to warrants issued in<BR>
    connection with redeemable<BR>
    preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253,070</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued preferred dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(304,859</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(304,859</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>BALANCE, MARCH&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,106,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,956,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,776,961</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(41,946</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,294,325</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,294,325</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(152,627</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(152,627</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,446,952</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Warrants issued in connection with<BR>
    senior notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Imputed interest on note payable in connection<BR>
    with acquisition of intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,152</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Value ascribed to warrants issued in<BR>
    connection with redeemable<BR>
    preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164,144</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of minority interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued preferred dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(361,461</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(361,461</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>BALANCES, MARCH&nbsp;31, 2005</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,106,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,012,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,071,286</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(194,573</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,222,147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,109,203</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,109,203</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>294,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>294,596</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,814,607</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vesting of stock options as compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,867</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued preferred dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(71,428</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(71,428</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>BALANCE, JUNE&nbsp;30, 2005 (unaudited)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,106,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,965,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(33,180,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>100,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,084,315</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 7pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the consolidated financial statements.
</DIV>

<P align="center" style="font-size: 11pt;">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='207'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CASTLE BRANDS INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS</FONT>" -->

<DIV align="center" style="font-size: 7pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS INC. and SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>(Unaudited)</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH FLOWS FROM OPERATING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net loss</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,440,720</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,423,977</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,294,325</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,605,456</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,109,203</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net loss to net cash used in operating
    activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182,385</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest in net loss of consolidated subsidiary</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,339</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,721</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(129,159</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on disposal of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,816</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of deferred financing costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>387,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,094</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of changes in foreign currency rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,247</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(136,729</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in operations, assets and liabilities, net of effects of
    business acquisition in 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Increase)/decrease in accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(147,103</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,574,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,775,404</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(356,865</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,030,374</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase/(decrease) in due from related parties&nbsp;- GXB</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(355,161</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,423</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Increase in inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(444,491</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,871</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,569,612</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(489,974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(220,758</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease/(increase) in prepaid expenses and supplies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(100,904</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(343,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Increase)/decrease in other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(145,582</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(85,678</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(878,568</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,357</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase/(decrease) in accounts payable and accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(283,330</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,705,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,313,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>529,795</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Decrease)/increase in due to related parties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(306,859</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,241,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>492,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(336,042</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease in brand acquisition payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(159,911</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(255,879</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total adjustments</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(391,846</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,050,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(903,366</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,131,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,414,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>NET CASH USED IN OPERATING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,832,566</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,373,497</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,197,691</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,474,139</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,523,849</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH FLOWS FROM INVESTING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,439</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47,443</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(165,725</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,460</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,435</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,626</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,269</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,988</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,338</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,168</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Business acquisition - net of cash acquired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,667,105</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(406,116</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(426,985</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,308</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH USED IN INVESTING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,722,817</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(597,829</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(456,783</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(81,911</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH FLOWS FROM FINANCING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of notes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,190,394</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,596,797</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,694,880</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,101,025</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(989,180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from notes payable and warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,070,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,556,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,288,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,052,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments of obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(211,706</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,823</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,089</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(377,828</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of redeemable convertible preferred stock and warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,249,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,500,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments for cost of stock issuance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(209,546</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,935,228</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(705,522</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,929</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>NET CASH PROVIDED BY FINANCING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,919,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,312,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,008,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,951,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,972,802</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,216,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,213,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(632,958</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>EFFECTS OF FOREIGN CURRENCY TRANSLATION</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(405</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,998</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH AND CASH EQUIVALENTS - BEGINNING</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,461,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,461,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,676,398</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH AND CASH EQUIVALENTS - ENDING</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>235,888</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>3,461,441</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>5,676,398</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>3,481,956</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap><B>5,031,442</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>SUPPLEMENTAL DISCLOSURES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Schedule of non-cash investing and financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,051,555</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note payable - intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Value ascribed to minority interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,329,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment in subsidiary</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,824,710</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common stock in business acquisition</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt issued in business acquisition</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,984,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>92,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>132,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>343,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>196,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,161</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 7pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the consolidated financial statements.
</DIV>

<P align="center" style="font-size: 11pt;">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='208'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CASTLE BRANDS INC. AND SUBSIDIARIES Notes to Financial Statements</FONT>" -->

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;1&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    A.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Description of Business and Business
    Combination</U>&nbsp;&#150; Castle Brands Inc. (&#147;CBI&#148;
    or &#147;the Company&#148;) is the successor to Great Spirits
    Company, LLC, a Delaware limited liability company
    (&#147;GSC&#148;). The Company was formed in February 1998. In
    May 2003, Great Spirits Ireland, a wholly owned subsidiary of
    the Company began operations in Ireland to market the
    Company&#146;s products internationally. In July 2003, Castle
    Brands Inc. and Castle Brands (USA)&nbsp;Corp.
    (&#147;CB-USA&#148;) were formed under the laws of Delaware in
    contemplation of a pending acquisition. On December&nbsp;1,
    2003, CBI acquired The Roaring Water Bay Spirits Group Limited.
    and The Roaring Water Bay Spirits Marketing and Sales Company
    Limited. The acquisition has been accounted for under purchase
    accounting. Simultaneously, Great Spirits Company, LLC was
    merged into CB-USA, and the Company issued stock to GSC&#146;s
    shareholders in exchange for their shares of GSC. Subsequent to
    the acquisition, The Roaring Water Bay Spirits Group Limited
    (&#147;RWB&#148;) was renamed Castle Brands Spirits Group
    Limited (&#147;CB Group&#148;) and The Roaring Water Bay Spirits
    Marketing and Sales Company Limited was renamed Castle Brands
    Spirits Marketing and Sales Company Limited (&#147;CB-UK&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The Company has experienced recurring operating losses and
    negative cash flows from operations and has a stockholders&#146;
    equity (deficiency) of $12,222,147 as of March&nbsp;31, 2005 and
    $15,099,275 as of June&nbsp;30, 2005. In June of 2005, the
    Company raised $5&nbsp;million from the sale of the second
    tranche of its convertible notes. In August 2005, the Company
    raised $2.9&nbsp;million from the sale of Series&nbsp;C
    preferred stock and a further $5&nbsp;million from a sale of
    convertible notes to a second investor. 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 June&nbsp;30, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    B.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Principles of Consolidation</U>&nbsp;<B>-</B> The
    March&nbsp;31, 2004 and 2005 consolidated financial statements
    include the accounts of CBI, its wholly-owned subsidiaries,
    CB-USA and its wholly-owned foreign subsidiaries, CB Group and
    CB-UK, and its majority owned Gosling-Castle Partners, Inc.
    hereafter collectively referred to as the &#147;Company&#148;.
    The accounts of the subsidiaries have been included as of the
    date of acquisition. All significant intercompany transactions
    and balances have been eliminated.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    C.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Unaudited Interim Information</U>&nbsp;- The consolidated
    financial statements for the three months ended June&nbsp;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 three months
    ended June&nbsp;30, 2005 are not necessarily indicative of the
    results to be expected for the year ending March&nbsp;31, 2006,
    or for any other interim period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    D.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Pro Forma Balance Sheet (unaudited)</U>&nbsp;&#150; The
    Company&#146;s Board of Directors has authorized the filing of a
    registration statement with the Securities and Exchange
    Commission to register shares of its common stock in an initial
    public offering. If the initial public offering closed as
    presently anticipated in December 2005, all of the redeemable
    convertible preferred stock along with the related accrued
    dividends then outstanding would have converted into</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;1&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    4,201,709&nbsp;shares of common stock and the entire principal
    amount of the 5% Euro denominated convertible notes into
    263,362&nbsp;shares of common stock and $6&nbsp;million of the
    $15&nbsp;million principal amount of the 6%&nbsp;convertible
    notes into 857,142&nbsp;shares of common stock. The pro forma
    balance sheet (unaudited) at June&nbsp;30, 2005 reflects the
    conversion of all outstanding redeemable convertible preferred
    stock and certain convertible notes payable into common stock as
    if such conversion had occurred at June&nbsp;30, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    E.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Organization and Operations</U>&nbsp;<B>-</B> The Company is
    principally engaged in the manufacture, marketing and sale of
    fine spirit brands of vodka, Irish whiskey, rums and liqueurs
    (the &#147;products&#148;) in the United States, Europe, and the
    Caribbean.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    F.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Cash and cash equivalents</U>&nbsp;<B>-</B> 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    G.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Trade accounts receivable</U>&nbsp;&#150; 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&#146;s customers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    H.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Revenue Recognition</U>&nbsp;- 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    I.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Inventories</U>&nbsp;<B>-</B> Inventories, which consists 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&#146;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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    J.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Equipment</U>&nbsp;<B>- </B>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 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    K.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Goodwill and other intangible assets</U>. 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&nbsp;31, 2004 and 2005,
    goodwill and other indefinite lived intangible assets that arose
    from acquisitions was $11.3&nbsp;million and $11.8&nbsp;million,
    respec-</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;1&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    tively. On April&nbsp;1, 2004, the Company adopted
    SFAS&nbsp;No.&nbsp;142, &#147;Goodwill and Other Intangible
    Assets.&#148; Under SFAS&nbsp;No.&nbsp;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&#146;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&nbsp;No.&nbsp;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&nbsp;No.&nbsp;144 (see Note&nbsp;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&nbsp;31, 2004 and 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    L.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Foreign Currency Translation</U>&nbsp;<B>- </B>The functional
    currency for the Company&#146;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.&nbsp;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 deficit.
    Gains or losses resulting from foreign currency transactions are
    included in other income/expenses.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    M.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Fair Value of Financial Instruments</U>&nbsp;-
    SFAS&nbsp;No.&nbsp;107, <I>Disclosures About Fair Value of
    Financial Instruments</I>, 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    N.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Income Taxes</U>&nbsp;<B>- </B>The Company follows
    SFAS&nbsp;No.&nbsp;109, <I>Accounting for Income Taxes.</I>
    Under the asset and liability method of SFAS&nbsp;No.&nbsp;109,
    deferred tax assets and liabilities are</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;1&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    O.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Stock Based Awards</U>&nbsp;- 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.&nbsp;25,
    &#147;Accounting for Stock Issued to Employees&#148;. Under the
    intrinsic value method, compensation costs for stock options, if
    any, are measured as the excess of the Company&#146;s estimated
    value of the Company&#146;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&nbsp;No.&nbsp;123 &#147;Accounting
    for Stock Based Compensation&#148;, 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&nbsp;No.&nbsp;123.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Disclosure of pro forma net loss, as if all stock options were
    accounted for at fair value, is required by
    SFAS&nbsp;No.&nbsp;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 as of:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 11pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the year then</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the quarter then</B></TD><TD></TD>
</TR>

<TR style="font-size: 11pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 11pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 11pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    loss attributable to
    common &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders,
    as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,981,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,819,930</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,691,844</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,180,631</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based
    compensation
    expense &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;determined
    under fair value method</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(370,068</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro
    forma net loss attributable to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,981,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(13,189,998</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,691,844</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,180,631</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss
    per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic
    and diluted&nbsp;-&nbsp;as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic
    and diluted&nbsp;- pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    FASB Statement&nbsp;123 (Revision&nbsp;2004), &#147;Share-Based
    Payment,&#148; was issued in December 2004 and is effective as
    of the beginning of the first interim or annual reporting
    periods that begin after June&nbsp;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.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;1&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The pro forma disclosures previously permitted under
    FAS&nbsp;123 no longer will be an alternative to financial
    statement recognition. The Company is required to adopt
    FAS&nbsp;123R beginning April&nbsp;1, 2006. The Company expects
    that the adoption of FAS&nbsp;123R 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&nbsp;123R, and it has not
    determined whether the adoption will result in amounts that are
    similar to the current pro forma disclosures required under
    FAS&nbsp;123. The Company has not yet determined the impact of
    FAS&nbsp;123R on its compensation policies or plans, if any.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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 4.4%; expected volatility 25%; and
    expected life of 7.2&nbsp;years. The weighted average fair value
    of options granted in fiscal year 2004 and 2005 and for the
    three months ended June 30, 2005 was $2.17, $2.69 and $2.17,
    respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    P.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Research and Development Costs</U>&nbsp;<B>- </B>The costs of
    research, development and product improvement are charged to
    expense as incurred.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Q.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Advertising</U>&nbsp;&#150; 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&nbsp;31, 2003, 2004 and 2005, respectively, and $1,440,183
    and $1,068,575 the three months ended June&nbsp;30, 2004 and
    2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    R.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Impairment of Long-Lived Assets</U>&nbsp;&#150; 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.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    S.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Use of Estimates</U>&nbsp;- 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 items such as to
    determine whether any impairment is to be recognized, allowance
    for doubtful accounts, depreciation, amortization and expense
    accruals.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;2&nbsp;&#150;&nbsp;<U>BASIC AND DILUTED NET LOSS
PER COMMON SHARE</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    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 2005 and 2004, no adjustment has been made to
    the weighted average outstanding common shares as the</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-11

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;2&nbsp; &#150;&nbsp;</B></TD>
    <TD align="left">
    <B><U>BASIC AND DILUTED NET LOSS PER COMMON SHARE
    (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    assumed exercise of outstanding options and warrants and the
    assumed conversion of preferred stock and convertible debentures
    is anti-dilutive.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Potential common shares not included in calculating diluted net
    loss per share are as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30,</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock
    options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>745,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>594,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>899,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock
    warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>207,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>390,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>295,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>498,618</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Convertible
    debentures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,540,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>263,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,513,160</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Convertible
    preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,573,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,741,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,804,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,741,965</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,883,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,766,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,957,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,653,243</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    For the years ended March&nbsp;31, 2003, the Company had issued
    100,000 warrants for membership interests in GSC to a lender.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Subsequent to June&nbsp;30, 2005, the Company issued the
    following dilutive securities:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In July 2005 the Company entered into an agreement with an
    investor to issue $5,000,000 of convertible notes. These notes
    can convert into common stock at $8&nbsp;per share (see
    Note&nbsp;15).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In July 2005 in connection with the Series&nbsp;C Preferred
    Stock, the Company granted, to an advisor, warrants to acquire
    100,000&nbsp;shares of the Company&#146;s common stock with an
    exercise price of $8.00. The Warrants are subject to
    anti-dilution provisions, vested immediately and are exercisable
    through December&nbsp;31, 2009.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;3&nbsp;-&nbsp;<U>INVENTORIES</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30,</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories
    consist of:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Raw
    materials</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>903,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,154,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,600,631</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finished
    goods</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,793,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,342,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,829,445</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,696,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,496,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,430,076</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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&#146;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.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;4&nbsp;-&nbsp;<U>INVESTMENTS AND
ACQUISITIONS</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    <U>Investment in Gosling-Castle Partners Inc.</U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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.
    (&#147;GCP&#148;). 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&#146;s
    Limited and after the Company&#146;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&#146;s Export
    (Bermuda) Limited (&#147;GXB&#148;) to distribute Gosling&#146;s
    rum in the United States. Gosling Partners Inc. had originally
    been formed to acquire, and had acquired prior to the
    Company&#146;s investment in GCP, the following:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="8%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149; &nbsp;</TD>
    <TD align="left">
    global distribution rights (excluding Bermuda) to the
    Gosling&#146;s portfolio of products;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149; &nbsp;</TD>
    <TD align="left">
    appointment as the exclusive authorized global exporter for the
    GXB product line;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149; &nbsp;</TD>
    <TD align="left">
    an exclusive license for the use of GXB&#146;s global trademarks
    for its brand portfolio;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="31%"></TD>
    <TD width="69%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    $1,025,000 on April&nbsp;1, 2005</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    $1,125,000 on October&nbsp;1, 2005</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    $1,000,000 on April&nbsp;1, 2006</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    $1,000,000 on October&nbsp;1, 2006; and</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    $750,000 on April&nbsp;1, 2007</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Effective with the payment of the second installment on
    October&nbsp;1, 2005, this promissory note accrues interest on
    the unpaid principal amount at the rate of 4%&nbsp;per annum
    until the note is repaid in full.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The global distribution agreement commenced on April&nbsp;1,
    2005 and has a 15&nbsp;year term. It is renewable for additional
    15&nbsp;year terms as long as GCP meets certain case sale
    targets during the initial term as set forth in the agreement.
    (See Note&nbsp;19&nbsp;&#150; Gosling-Castle Partners Inc.
    Export Agreement with Gosling&#146;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&nbsp;14). This deferred tax liability was
    recorded as an increase to the value of the distribution
    agreement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    <U>Acquisition of CB Group and CB-UK</U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    On December&nbsp;1, 2003, the Company acquired the
    CB&nbsp;Group, including 95% of its operating subsidiary CB-UK.
    CB&nbsp;Group is the producer and primary marketer of Boru
    Vodka, as well as Clontarf Irish Whiskey and several Irish cream
    liqueurs. CB-UK is the marketing company that operates primarily
    in Great Britain. As part of the acquisition, in May 2004,
    CB&nbsp;Group purchased the remaining shares of its operating
    subsidiary from minority shareholders</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;4&nbsp;-&nbsp;<U>INVESTMENTS AND ACQUISITIONS
(CONT&#146;D)</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    pursuant to the terms of a put option contained within its 1999
    Business Expansion Scheme (&#147;BES 1&#148;). The total cost of
    this BES 1&nbsp;share purchase of
    <FONT face="times new roman,times">&#128;</FONT>317,491 was
    offset, in part, by the agreement of the four former
    shareholders of CB&nbsp;Group to contribute a total of
    <FONT face="times new roman,times">&#128;</FONT>100,000 in the
    form of 15,000&nbsp;shares of Castle Brands Inc. Series&nbsp;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) including $1,154,863 of acquisition
    costs consisting of investment banking and legal fees, was
    $17,048,946, which consisted of cash of $6,097,079,
    1,306,666&nbsp;shares of the Company&#146;s common stock with a
    fair value of $7,840,000, $1,650,800 in convertible subordinated
    notes payable and $306,204 of other notes payable. The cash
    portion of the acquisition was financed with proceeds from the
    issuance of $16,550,000 of Series&nbsp;C convertible preferred
    stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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&#146;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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The following table summarizes the purchase price allocation for
    the acquisition of RWB:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Description</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Amount</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    tangible assets acquired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>210,185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Identifiable
    intangible assets (definite life)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>825,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Identifiable
    intangible assets (indefinite life)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,840,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,756,051</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
    consideration</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,631,236</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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&#146;s various
    products, together with the Company&#146;s relationship with its
    distributor in Dublin and its supply relationship with the
    distiller of its vodka.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    On December&nbsp;1, 2003, the Company has 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</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;4&nbsp;-&nbsp;<U>INVESTMENTS AND ACQUISITIONS
(CONT&#146;D)</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    tangible and intangible assets, the additional value ascribed
    above those fair values was recorded as additional goodwill.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The changes in the carrying amount of goodwill for the years
    ended March&nbsp;31, 2005 and 2004 were as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Amount</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance
    as of March&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,676,487</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
    tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>629,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance
    as of March&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,305,931</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition
    of minority interests</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance
    as of March&nbsp;31, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,756,051</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,308</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance
    as of June&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,759,359</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The results of CB&nbsp;Group and CB-UK have been included in the
    consolidated financial statements since the date of acquisition.
    Unaudited pro forma results of operations for the year ended
    March&nbsp;31, 2004 are included below. Such pro forma
    information assumes that the acquisition had occurred as of
    April&nbsp;1, 2003.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31,&nbsp;2004</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,637,596</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
    profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,513,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,539,200</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    loss per common share&nbsp;&#150;&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;basic
    and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.92</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;5&nbsp;-&nbsp;<U>EQUIPMENT</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    Equipment consists of the following as of:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30,</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equipment
    and software</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>465,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>670,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>683,466</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transportation
    equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furniture
    and fixtures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,602</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leasehold
    improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,733</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>534,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>703,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>706,801</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less:
    accumulated depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>275,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>353,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>370,712</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>258,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>350,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>336,089</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Depreciation expense for the years ended March&nbsp;31, 2003,
    2004, and 2005 and for the three months ended June&nbsp;30, 2004
    and 2005 totaled $6,904, $47,771, $81,724, and $12,560 and
    $27,856, respectively.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;6&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>INTANGIBLE ASSETS</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    Intangible assets consist of the following as of:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March 31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March 31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June 30,</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brands,
    trademarks and rights</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,086,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,128,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,146,159</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
    identifiable intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,665,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,665,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,665,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,751,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,793,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,811,159</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less:
    accumulated amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>303,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>318,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>459,478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,447,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,475,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,351,681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The identifiable intangible assets consist of a patent, trade
    names and formulations of the various products and distribution
    and supplier relationships.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Amortization expense for the years ended March&nbsp;31, 2003,
    2004, and 2005 and the three months ended June&nbsp;30, 2004 and
    2005 totaled $100,620, $90,829 and $85,362, $13,750 and $154,530
    respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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 then the
    carrying amount of the asset, an impairment loss is recognized
    based on the fair value of the asset.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;7&nbsp;-&nbsp;<U>RESTRICTED CASH</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    In connection with the credit facilities as described in
    notes&nbsp;8 and 9, personal guarantees of the two former
    managing directors of CB&nbsp;Group and CB-UK in the amount of
    <FONT face="times new roman,times">&#128;</FONT>158,717 were
    cancelled and replaced with a deposit of cash collateral of
    <FONT face="times new roman,times">&#128;</FONT>300,000, or
    $387,494 and</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>NOTE&nbsp;7&nbsp;-&nbsp;<U>RESTRICTED CASH
    (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>$361,993 (as translated at the exchange rate in effect on
March&nbsp;31, 2005 and June&nbsp;30, 2005, respectively).</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;8&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>ACCOUNTS PAYABLE AND ACCRUED EXPENSES</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    Accounts payable and accrued expenses consist of the following
    as of:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 24pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March 31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March 31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June 30,</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accou
    payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">nts $</TD>
    <TD align="right" valign="bottom" nowrap>1,885,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,785,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,177,456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accru
    expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>ed 981,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,897,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,786,218</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,866,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,682,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,963,674</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    CB&nbsp;Group and CB-UK maintain overdraft coverages with a
    financial institution in Ireland of up to
    <FONT face="times new roman,times">&#128;</FONT>400,000
    ($508,000) and &#163;20,000 ($16,400), respectively. Overdarft
    balances are included in accounts payable for the periods
    presented.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;9&nbsp;-&nbsp;<U>NOTES&nbsp;PAYABLE AND CAPITAL
LEASE</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap>Notes payable consist of the&nbsp;following&nbsp;as&nbsp;of:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    The Company has arranged revolving credit facilities aggregating
    approximately
    <FONT face="times new roman,times">&#128;</FONT>1,677,000
    ($2,175,000) 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
    <FONT face="times new roman,times">&#128;</FONT>295,000
    ($382,000) term note with the same lender. The note carries an
    interest rate of 5.2% and calls for monthly payments of
    principal and interest of
    <FONT face="times new roman,times">&#128;</FONT>6,377 through
    2006.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>780,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,813,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,254,508</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    The Company has arranged revolving credit facilities aggregating
    approximately &#163;242,000 ($457,000). 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%.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>256,915</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;9&nbsp;-&nbsp;<U>NOTES&nbsp;PAYABLE AND CAPITAL
LEASE (CONT&#146;D)</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap>Notes payable consist of the&nbsp;following&nbsp;as&nbsp;of:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    At March&nbsp;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.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>630,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    In connection with the Company&#146;s acquisition of
    CB&nbsp;Group, the Company issued to the former minority
    shareholders of CB&nbsp;Group
    <FONT face="times new roman,times">&#128;</FONT>255,000
    ($331,000) of subordinated notes, which mature on July&nbsp;11,
    2007. The notes accrue interest at the rate of 5.7%&nbsp;per
    annum with the aggregate interest payable being limited to
    <FONT face="times new roman,times">&#128;</FONT>51,000
    ($66,000). The total principal and interest on the notes are due
    at maturity.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>310,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>329,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>307,683</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;9&nbsp;-&nbsp;<U>NOTES&nbsp;PAYABLE AND CAPITAL
LEASE (CONT&#146;D)</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap>Notes payable consist of the&nbsp;following&nbsp;as&nbsp;of:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    On June&nbsp;9, September 28 and October&nbsp;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&nbsp;30th and May&nbsp;31st, and matured on
    May&nbsp;31, 2007. Effective August&nbsp;15, 2005, the terms of
    these notes were modified with the consent of the note holders
    to mature on May&nbsp;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&nbsp;25&nbsp;shares of the
    Company&#146;s common shares. At March&nbsp;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 original
    term of the notes with an original maturity of May 2007.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,561,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,570,706</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;9&nbsp;-&nbsp;<U>NOTES&nbsp;PAYABLE AND CAPITAL
LEASE (CONT&#146;D)</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap>Notes payable consist of the&nbsp;following&nbsp;as&nbsp;of:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    On March&nbsp;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&nbsp;31, 2005, $5,000,000 of
    convertible notes were issued. The notes, which mature five
    years from the date of issuance, bear interest at the rate of
    6%&nbsp;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%&nbsp;per annum. The
    notes may be converted into common stock at $8&nbsp;per share at
    any time, and shall be converted at the option of the holder
    automatically after the third year from the date of issuance on
    the 30th&nbsp;consecutive trading day on which the closing price
    of the common stock is no less than $20&nbsp;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.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    On February&nbsp;14, 2005, the Company, through its interest in
    GCP, entered into an agreement with Gosling&#146;s Export
    (Bermuda) Limited (&#147;GXB&#148;) to acquire the global
    distribution rights (excluding Bermuda) to GXB&#146;s portfolio
    of products in exchange for $2,500,000 in non-interest bearing
    notes due in four equal semi-annual installments.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,380,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,775,407</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Total</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,931,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,256,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,165,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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%&nbsp;per annum, to be paid through July 2009. As of
    March&nbsp;31, 2005 and June&nbsp;30, 2005, the</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-20
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;9&nbsp;-&nbsp;<U>NOTES&nbsp;PAYABLE AND CAPITAL
LEASE (CONT&#146;D)</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Company owed $16,000 and $14,909, respectively, under this
    lease. Future minimum lease payments equal $17,872 including
    interest.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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&nbsp;31,
    2005):</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap>For the years ending</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Amount</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,032,383</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,224,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,335</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>341,498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,661,665</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,290,577</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Less current portion</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,032,383</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Non current portion</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,258,194</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;10&nbsp;-&nbsp;<U>SHAREHOLDER
NOTES&nbsp;PAYABLE</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In connection with the Company&#146;s acquisition of CB Group,
    <FONT face="times new roman,times">&#128;</FONT>444,389
    ($576,372) of subordinated notes were issued by CB Group in
    substitution of subordinated notes of the same amount originally
    issued on April&nbsp;1, 2001 by CB Group. The original notes had
    a maturity date of April&nbsp;1, 2006 and were non-interest
    bearing. The replacement notes are non-interest bearing and the
    terms called for annual principal payments of
    <FONT face="times new roman,times">&#128;</FONT>177,743,
    <FONT face="times new roman,times">&#128;</FONT>133,323 and
    <FONT face="times new roman,times">&#128;</FONT>133,323 on
    December&nbsp;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&nbsp;31, 2004 and 2005 and the three
    months ended June&nbsp;30, 2005, the Company recorded interest
    expense on these notes of $6,360, $19,311, and $4,832,
    respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Principal payments over the remaining term of the notes are due
    as follows (as translated at the exchange rate in effect on
    March&nbsp;31, 2005):</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap>For the years ending</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Amount</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>344,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;10&nbsp;-&nbsp;<U>SHAREHOLDER NOTES&nbsp;PAYABLE
(CONT&#146;D)</U></B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In connection with the acquisition of CB Group and CB-UK in
    December 2003, the former principal shareholders received
    <FONT face="times new roman,times">&#128;</FONT>1,374,750 of
    convertible subordinated notes in partial consideration for
    their shares in CB Group and CB-UK. These notes are convertible
    into common shares of the Company at the current conversion
    price of <FONT face="times new roman,times">&#128;</FONT>5.22,
    which is subject to adjustment from time to time as set forth in
    the note agreement. These convertible notes mature on
    December&nbsp;1, 2006 and bear an interest rate of 5% payable
    quarterly on March&nbsp;31st, June&nbsp;30th September&nbsp;30th
    and December&nbsp;31st. As of March&nbsp;31, 2005 and
    June&nbsp;30, 2005, the Company was indebted in the amount of
    $1,775,627 and $1,658,773, respectively, on the notes (as
    translated at the exchange rate in effect on March&nbsp;31, 2005
    and June&nbsp;30, 2005).</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;11&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>COMMON STOCK</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    On March&nbsp;31, 2002, Great Spirits LLC, the predecessor
    company to Castle Brands Inc. had 360,000 membership shares
    outstanding. On July&nbsp;10, 2003, the Board of Directors
    declared a five-for-one stock split payable on December&nbsp;1,
    2003. The Company retained the current par value of $.01 for all
    common shares. On December&nbsp;1, 2003 the Company, in
    connection with the acquisition of RWB, issued
    1,306,666&nbsp;shares of common stock in partial payment of the
    acquisition (See Note&nbsp;4). At March&nbsp;31, 2004 and 2005
    and June&nbsp;30, 2005, the Company had 3,106,666 common shares
    outstanding.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;12&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>REDEEMABLE CONVERTIBLE PREFERRED STOCK</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    The Company had convertible preferred stock outstanding, as
    follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30,</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap>Description</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Convertible Preferred Stock, Series&nbsp;A, $1&nbsp;par value,
    550,000&nbsp;shares authorized, 535,715&nbsp;shares issued and
    outstanding; cash dividends at 5% or accrued dividends at 7% at
    Company&#146;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&nbsp;per
    share upon initial public offering of $10&nbsp;million or more.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,750,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,750,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,750,005</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;12&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>REDEEMABLE CONVERTIBLE PREFERRED STOCK
    (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30,</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap>Description</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Convertible Preferred Stock, Series&nbsp;B, $1&nbsp;par value,
    200,000&nbsp;shares authorized, issued and outstanding; cash
    dividends at 5% or accrued dividends at 7% at Company&#146;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&nbsp;per share upon
    initial public offering of $10&nbsp;million or more.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,200,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Convertible Preferred Stock, Series&nbsp;C, $1&nbsp;par value,
    3,353,750&nbsp;shares authorized, 2,068,750&nbsp;shares issued
    and outstanding at March&nbsp;31, 2004 and 3,006,250&nbsp;shares
    issued and outstanding at March&nbsp;31, 2005 and June&nbsp;30,
    2005 cash dividends at 4% or accrued dividends at 6% at
    Company&#146;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&nbsp;per
    share upon initial public offering of $10&nbsp;million or more.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,550,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,050,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,050,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    (See Note&nbsp;15 for consideration given to warrant beneficial
    conversion features)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Total</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,500,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,000,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,000,005</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The following are the Series&nbsp;A, B, and C Preferred Stock
    transactions of the Company from April&nbsp;1, 2002 through
    March&nbsp;31, 2005:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In February 2003, Great Spirits 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&nbsp;B Preferred Stock and the elimination of certain
    shareholder preference rights. In December 2003, this issue was
    exchanged for comparable Castle Brands Inc. Series&nbsp;B
    Preferred Stock and is convertible into common shares at
    $6.00&nbsp;per share at the option of the holder or in an
    automatic conversion upon initial public offering of
    $10&nbsp;million or more.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;12&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>REDEEMABLE CONVERTIBLE PREFERRED STOCK
    (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In August 2003, Great Spirits LLC completed an offering of
    535,715&nbsp;shares of Series&nbsp;A preferred stock. In
    December 2003, this issue was exchanged for comparable CBI
    Series&nbsp;A preferred stock is convertible into common shares
    at $7&nbsp;per share at the option of the holder or in an
    automatic conversion upon initial public offering of
    $10&nbsp;million or more.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In December, 2003, CBI raised $16,525,000 issuing
    2,065,625&nbsp;shares of Series&nbsp;C preferred stock in
    conjunction with the RWB acquisition. Series&nbsp;C preferred
    stock is convertible into common stock at the option of the
    holder at $8&nbsp;per share or in an automatic conversion upon
    initial public offering of $10&nbsp;million or more.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In January 2004, CBI raised $25,000 issuing 3,125&nbsp;shares of
    Series&nbsp;C preferred stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In November 2004, CBI raised $5,001,178, less $184,434 in
    financing charges, issuing 625,147&nbsp;shares of Series&nbsp;C
    preferred stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In December 2004, CBI raised $888,400, less $86,845 in financing
    charges, issuing 111,050&nbsp;shares of Series&nbsp;C preferred
    stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In February 2005, CBI raised $1,000,000, less $20,000 in
    financing charges, issuing 125,000&nbsp;shares of Series&nbsp;C
    preferred stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In March 2005, CBI raised $610,422, less $15,958 in financing
    charges, issuing 76,303&nbsp;shares of Series&nbsp;C preferred
    stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Holders of Series&nbsp;A and Series&nbsp;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&nbsp;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&nbsp;C
    preferred stock financing, the holders of Series&nbsp;A and
    Series&nbsp;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&nbsp;A and Series&nbsp;B preferred
    stock have the option, at any time, to convert their preferred
    shares into common shares at a conversion price of $7&nbsp;per
    share and $6&nbsp;per share, respectively. Series&nbsp;A
    preferred stock will automatically convert into common stock at
    the then applicable conversion price, in the event of either
    (a)&nbsp;the vote of the holders of at least two-thirds of the
    series&nbsp;A and B preferred shares, or (b)&nbsp;the closing of
    an underwritten public offering with aggregate gross proceeds of
    at least $10&nbsp;million. The Series&nbsp;B preferred stock is
    held by a single investor and possesses similar automatic
    conversion features. For the years ended March&nbsp;31, 2004 and
    2005 and the three months ended June&nbsp;30, 2005, dividends of
    $319,819, $681,280 and $767,668 in arrears, respectively, remain
    unpaid.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Commencing December&nbsp;1, 2005, holders of Series&nbsp;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&nbsp;per share. Commencing
    December&nbsp;1, 2008, the Company may redeem the Series&nbsp;C
    preferred stock at any time, in whole or in part,</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;12&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>REDEEMABLE CONVERTIBLE PREFERRED STOCK
    (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    at the redemption price of $8&nbsp;per share, as adjusted, plus
    accrued but unpaid dividends. The Series&nbsp;C preferred stock
    will automatically convert into common stock at the then
    applicable conversion price, in the event of either (a)&nbsp;the
    vote of a majority of the holders of the preferred shares, or
    (b)&nbsp;the closing of an underwritten public offering with
    aggregate gross proceeds of at least $10&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    On each of February&nbsp;20, 2009, 2010, 2011, 2012 and 2013,
    the Company is obligated to redeem 20% of the outstanding shares
    of Series&nbsp;A and Series&nbsp;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&nbsp;per share plus accrued and
    unpaid dividends for the Series&nbsp;A preferred stock and
    $6&nbsp;per share plus accrued and unpaid dividends for the
    Series&nbsp;B preferred stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    On each of December&nbsp;1, 2009, 2010, 2011, 2012 and 2013, the
    Company is obligated to redeem 20% of the outstanding shares of
    Series&nbsp;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&nbsp;per share plus accrued and unpaid dividends.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The holders of Series&nbsp;A, Series&nbsp;B and Series&nbsp;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&nbsp;A, Series&nbsp;B and Series&nbsp;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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The Series&nbsp;A, Series&nbsp;B and Series&nbsp;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&nbsp;31, 2005,
    the liquidation preference of the Series&nbsp;A, Series&nbsp;B
    and Series&nbsp;C preferred stock are equal to $4,254,310,
    $1,376,975 and $24,050,000, respectively. As of June&nbsp;30,
    2005, the liquidation preference of the Series&nbsp;A,
    Series&nbsp;B and Series&nbsp;C preferred stock are equal to
    $4,319,755, $1,397,918 and $24,050,000, respectively.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;13&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>FOREIGN CURRENCY HEDGING</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    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&nbsp;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
    <FONT face="times new roman,times">&#128;</FONT>1 = $1.2924 as
    compared to the spot rate at March&nbsp;31, 2005 of
    <FONT face="times new roman,times">&#128;</FONT>1 = $1.2916. At
    June&nbsp;30, 2005, the Company held outstanding forward
    exchange positions for the purchase of Euros, expiring through
    December 2005, in the amount of $798,476 with a weighted average
    conversion rate of
    <FONT face="times new roman,times">&#128;</FONT>1 = $1.2730 as
    compared to the spot rate at June&nbsp;30, 2005 of
    <FONT face="times new roman,times">&#128;</FONT>1 = $1.2066.
    Gain or loss on foreign transactions is included in other income
    and expense.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;14&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>PROVISION FOR INCOME TAXES</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    Income taxes benefit (expense)&nbsp;for the years ended
    March&nbsp;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&nbsp;31, 2005, the company had federal net
    operating loss carryforwards of approximately $10,120,000 for
    U.S.&nbsp;tax purposes, which expire in 2025 and foreign net
    operating loss carryforwards of approximately $7,080,000 which
    carryforward without limit of time.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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&nbsp;31, 2003, 2004, and 2005,
    respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The Company does not have any undistributed earnings from
    foreign subsidiaries at March&nbsp;31, 2004 and 2005 and
    June&nbsp;30, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The following table reconciles the income tax (benefit) expense
    and the federal statutory rate of 34%.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>year ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computed expected tax benefit, at 34%</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23.73</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29.70</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of foreign rate differential</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11.08</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-deductible interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.69</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State and local taxes, net of federal benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    On December&nbsp;1, 2003, the Company has 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
    purchse prict to the distribution agreement, the additional
    value ascribed above the fair value was recorded as additional
    goodwill.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In connection with the investment in GCP, 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&nbsp;years). For the years
    ended March&nbsp;31, 2004 and 2005 and the quarter ended
    June&nbsp;30, 2005, the Company has recognized $0, $0 and
    $37,037 of deferred tax benefit.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-26

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;14&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>PROVISION FOR INCOME TAXES (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The tax effects of temporary differences that give rise to
    deferred tax assets and deferred tax liabilities are presented
    below.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>March&nbsp;31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June&nbsp;30,</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency transactions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>54,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>92,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of intangibles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>296,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>282,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating loss carryforwards&nbsp;&#150; U.S.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>852,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,062,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,844,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating loss carryforwards&nbsp;&#150; foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>301,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>730,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>756,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total gross assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,471,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,180,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,918,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,471,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,180,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,918,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets acquired in acquisition of subsidiary</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(629,444</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(629,444</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(629,444</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets acquired in investment in joint-venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,222,222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,185,185</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(629,444</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,851,666</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,814,629</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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&nbsp;31, 2004 and
    March&nbsp;31, 2005 and June&nbsp;30, 2005 was approximately
    $1,471,000, $5,180,000 and $5,918,000 respectively. The net
    change in the total valuation allowance for the years ended
    March&nbsp;31, 2003, 2004 and 2005 and the three months ended
    June&nbsp;30, 2005, was $0, $1,471,000, and $3,709,000, and
    $815,000, respectively. The Company&#146;s deferred tax assets
    and liabilities are in different taxable entities, which do not
    join in consolidated returns.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;15&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>STOCK OPTIONS AND WARRANTS</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="3%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>A.&nbsp;</TD>
    <TD align="left">
    <U>Stock Options</U>&nbsp;&#150;&nbsp;In July 2003, the Company
    implemented the 2003 Stock Incentive Plan (&#147;the Plan&#148;)
    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 to the
    Company&#146;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</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-27

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;15&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>STOCK OPTIONS AND WARRANTS (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="3%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">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.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 11pt">&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">In connection with the
    Company&#146;s acquisition of CB&nbsp;Group 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&nbsp;30, 2013.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 11pt">&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 11pt">The Company continues to account
    for stock based compensation using the intrinsic value method
    prescribed in Accounting Principles Board No.&nbsp;25,
    &#147;Accounting for Stock Issued to Employees.&#148;
    Compensation cost for stock options, if any, is measured as the
    excess of the quoted market price of the Company&#146;s stock at
    the date of grant over the amount an employee must pay to
    acquire the stock.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    A summary of the stock option plan is as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Year Ended March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>Three Months</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Weighted</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Weighted</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Weighted</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Average</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Average</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Average</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Exercise</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Exercise</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Exercise</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Shares</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Price</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Shares</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Price</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Shares</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Price</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>745,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.47</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(66,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>745,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>895,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options exercisable at year end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average fair value of options granted during the year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.17</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;15&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>STOCK OPTIONS AND WARRANTS (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The following table represents information relating to stock
    options outstanding at March&nbsp;31, 2005:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>Options Outstanding</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>Options Exercisable</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Weighted</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Weighted</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Weighted</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Average</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Average</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Average</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Exercise</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Remaining Life</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Exercise</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap>Shares</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Price</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>in Years</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Shares</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Price</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>563,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>182,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>745,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    As of June&nbsp;30, 2005, the total stock options outstanding
    was 895,500. The weighted average exercise price of these
    options was $6.73. The weighted average remaining life of these
    options was 8.95&nbsp;years. Total stock options exercisable as
    of June&nbsp;30, 2005 was 174,532. The weighted average exercise
    price of these options was $6.35.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The fair value of options at date of grant was estimated using
    the Black-Scholes option-pricing model utilizing the following
    assumptions:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>March 31,</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>June 30,</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk-free interest rates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.38%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.38-4.59%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.8%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected options life in years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.42-6.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.83-7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected stock price volatility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected dividend yield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    B.</TD>
    <TD></TD>
    <TD valign="top">
    <U>Stock Warrants</U>&nbsp;&#150;&nbsp;The Company has entered
    into various warrant agreements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    <U>Common Stock Warrants Issued to the Financing Agent</U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    On December&nbsp;1, 2003, in connection with the revolving
    credit facility, the Company granted to the lender warrants to
    acquire 100,000&nbsp;shares of the Company&#146;s common stock
    with an exercise price of $6. The warrants are subject to
    anti-dilution provisions, vest immediately and are exercisable
    through September&nbsp;1, 2012. The Company was not obligated to
    register the warrants or the underlying shares, except to the
    extent if the Company elects to file a registration statement
    then 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The value assigned to the warrants was recorded as a reduction
    in the value assigned to the credit facility (discount amount)
    and an increase in long-term liabilities. The discount amount of
    $282,295 was accreted over the three-year life of the credit
    facility as additional interest</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;15&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>STOCK OPTIONS AND WARRANTS (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    expense. The Company has recorded interest expense for the years
    ended March&nbsp;31, 2003, 2004 and 2005 and the three months
    ended June&nbsp;30, 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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)&nbsp;the fair
    market value of one share exceeds (b)&nbsp;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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In addition, the warrants issued in connection with the credit
    facility have a put right. Commencing September&nbsp;1, 2006,
    the put may be exercised by the holder at any time prior to the
    expiration date. The holder may require the Company to purchase
    in whole or in part, for an amount equal to the number of shares
    as to which the holder is exercising multiplied by the amount by
    which (a)&nbsp;the fair market value of one share exceeds
    (b)&nbsp;the exercise price in effect immediately prior to such
    exercise of the put right. The Company shall pay the put amount
    in immediately available funds on the date set; provided
    however, that if the put amount is greater than $300,000, the
    Company shall pay at least $300,000 on such date and shall have
    the option to pay the remainder of the put amount in four equal
    installments due at the end of each fiscal quarter thereafter,
    and bear interest at the prime rate as published by The Wall
    Street Journal, or in the event that The Wall Street Journal is
    not available at any time, such rate published in another
    publication as determined by the holder plus two hundred fifty
    (250)&nbsp;basis points per annum, or seven percent, or LIBOR
    plus (500)&nbsp;basis points.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    <U>Common Stock Warrants Issued to the Placement Agents</U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In connection with the Series&nbsp;C Preferred Stock, the
    Company granted, to the placement agents, warrants to acquire
    approximately 173,993&nbsp;shares of the Company&#146;s common
    stock with an exercise price of $8.00. The Warrants are subject
    to anti-dilution provisions, vest immediately and are
    exercisable through December&nbsp;31, 2009. The Company is not
    obligated to register the warrants or the underlying shares,
    except to the extent if the Company elects to file a
    registration statement then 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.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-30

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;15&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>STOCK OPTIONS AND WARRANTS (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The proceeds upon issuance of the Series&nbsp;C Preferred Stock
    were allocated as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Face value of Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,550,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beneficial conversion feature</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(417,214</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Relative fair value of preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,132,786</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The beneficial conversion feature was calculated using the
    Black-Scholes method as the difference between the beneficial
    conversion price and the fair value of the Company&#146;s common
    stock, multiplied by the number of shares into which the
    Preferred Stock were convertible in accordance with the Emerging
    Issues Task Force (&#147;EITF&#148;) Issue No. 00-27. The
    beneficial conversion feature 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    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)&nbsp;the fair market value of one share exceeds (b)&nbsp;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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    <U>Common Stock Warrants Issued to Senior Note&nbsp;Holders</U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    In connection with the issuance of the senior notes, the Company
    entered into a warrant agreement to grant the right to
    purchase&nbsp;116,500&nbsp;shares of the Company&#146;s common
    stock at</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    an exercise price of $8.00&nbsp;per share at any time through
    May&nbsp;31, 2009. These warrants were fair 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&nbsp;31, 2003, 2004 and 2005, and the
    three months ended June&nbsp;30, 2004 and 2005, the Company
    recorded $0, $0, and $30,668 and $2,697 and $9,232 of senior
    note accretion as additional interest expense.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-31

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;15&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>STOCK OPTIONS AND WARRANTS (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The following is a summary of the company&#146;s outstanding
    warrants:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Weighted</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Average</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Exercise</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Price</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Warrants</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Per&nbsp;Warrant</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants
    outstanding, April&nbsp;1, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>207,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.03</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants
    outstanding, March&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>207,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.03</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants
    outstanding and exercisable, March&nbsp;31, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>390,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants
    outstanding and exercisable, June&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>390,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;16&nbsp;-&nbsp;<U>RELATED PARTY TRANSACTIONS</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    A.</TD>
    <TD></TD>
    <TD valign="top">
    The Company is operating under an agreement with MHW, Ltd.
    (&#147;MHW&#148;) whereby MHW acts as the Company&#146;s agent
    in the distribution of its products across the United States.
    MHW&#146;s president also serves as a director of the Company
    and has a de&nbsp;minimus indirect ownership interest in the
    Company. In addition, MHW has a 10% ownership interest in the
    Celtic Crossing brand, one of the Company&#146;s products, in
    the United States and its territories, Canada, Mexico, and the
    Caribbean.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Pursuant to the MHW distribution agreement, MHW receives sales
    orders from the Company&#146;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 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,</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-32

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;16&nbsp;-&nbsp;<U>RELATED PARTY TRANSACTIONS
(CONT&#146;D)</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    the collected funds are the property of the Company and MHW is
    not liable to the Company for any unpaid balances due from
    wholesalers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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&nbsp;31,
    2003, 2004 and 2005, and the three months ended June&nbsp;30,
    2004 and 2005, aggregate charges recorded for all services
    provided were approximately $61,518, $84,450 and $121,393, and
    $21,327 and $52,054, respectively, which have been included in
    general and administrative expenses.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    B.</TD>
    <TD></TD>
    <TD valign="top">
    The Company had transactions with Knappogue Corp., a shareholder
    in the Company. Knappogue Corp. is controlled by the
    Company&#146;s CEO and his family. The transactions primarily
    involved rental fees for use of Knappogue Corp.&#146;s interest
    in the Knappogue Castle for various corporate purposes including
    Company meetings and to entertain customers. For the years ended
    March&nbsp;31, 2003, 2004 and 2005, and the three months ended
    June&nbsp;30, 2004 and 2005, fees incurred by the Company to
    Knappogue Corp. amounted to $28,009, $33,000, and $18,620, and
    $3,000 and $7,540, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    C.</TD>
    <TD></TD>
    <TD valign="top">
    Prior to the acquisition of CB&nbsp;Group, the Company purchased
    inventory from CB&nbsp;Group of approximately $737,000 pursuant
    to a 2001 distribution agreement. In addition, for the years
    ended March&nbsp;31, 2003, 2004 and 2005, and the three months
    ended June&nbsp;30, 2004 and 2005, the Company made payments to
    CB&nbsp;Group of approximately $160,000, $256,000 and $0, and $0
    and $0, respectively, pursuant to their 2001 brand acquisition
    agreement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    D.</TD>
    <TD></TD>
    <TD valign="top">
    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&#146;s portfolio of products and assisting the Company
    in successfully negotiating agency agreement 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&nbsp;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&#146;s management. This contract is cancelable by
    either party, at their convenience, upon 30&nbsp;days written
    notice. For the year ended March&nbsp;31, 2005, and the three
    months ended June&nbsp;30, 2005, BPW, Ltd. was paid $41,802 and
    $10,500, respectively, under this contract.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    E.</TD>
    <TD></TD>
    <TD valign="top">
    For the years ended March&nbsp;31, 2004 and 2005, and the three
    months ended June&nbsp;30, 2004 and 2005, the Company purchased
    goods from Tanis Investments Limited (&#147;Tanis&#148;) and
    Carbery Milk Products Limited (&#147;Carbery&#148;), both
    shareholders in the Company, of approximately $595,250 and
    $2,501,600, and $637,000 and $529,000, respectively. The Company
    had assumed the underlying supplier agreements with Tanis and
    Carbery from the predecessor company. As of March&nbsp;31, 2004
    and 2005, and June&nbsp;30, 2004 and 2005, the Company was
    indebted to these two shareholders approximately $348,000 and
    $369,000 and $839,000 and</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-33

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;16&nbsp;-&nbsp;<U>RELATED PARTY TRANSACTIONS
(CONT&#146;D)</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    $385,000, respectively, which is included in due to related
    parties on the accompanying consolidated balance sheet.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    F.</TD>
    <TD></TD>
    <TD valign="top">
    For the years ended March&nbsp;31, 2004 and 2005 and the three
    months ended June&nbsp;30, 2004 and 2005, the Company made
    payments of approximately $25,000 and $37,500, and $9,000 and
    $9,500, 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
    <FONT face="times new roman,times">&#128;</FONT>90,000&nbsp;($108,360)
    for the duration of the licensing period.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    G.</TD>
    <TD></TD>
    <TD valign="top">
    In February and August 2005, the Company executed agreements
    with the two Co-Managing Directors of CB&nbsp;Group whereby,
    effective March&nbsp;11, 2005 and October&nbsp;1, 2005,
    respectively, these individuals resigned their positions and
    directorships in CB&nbsp;Group in exchange for a consultancy
    agreement consisting of fifteen monthly payments totaling
    <FONT face="times new roman,times">&#128;</FONT>196,875, plus
    VAT. The balance due, net of payments made, was $233,772 and
    $160,901, at March 31 and June&nbsp;30, 2005, respectively. In
    addition, under the terms of these agreements, the stock options
    of these individuals were deemed to have accrued two years&#146;
    vesting at the end of the consultancy period, the exercise
    period for their stock options was extended to December&nbsp;1,
    2008, and the Company agreed to pay off the outstanding balance
    of their 5%&nbsp;Convertible Subordinated Notes, each dated
    December&nbsp;1, 2003, and each in the amount of
    <FONT face="times new roman,times">&#128;</FONT>465,550 and
    their Subordinated Note, each dated December&nbsp;1, 2003, and
    each in the amount of
    <FONT face="times new roman,times">&#128;</FONT>133,323 at the
    earlier of one month following the completion of the
    Company&#146;s initial public offering or in four quarterly
    installments beginning January&nbsp;1, 2006. The Company also
    reimbursed these individuals the legal fees incurred in
    connection with their consultancy agreements in the amounts of
    <FONT face="times new roman,times">&#128;</FONT>8,000 and
    <FONT face="times new roman,times">&#128;</FONT>5,000,
    respectively, plus VAT. For the year ended March 31, 2005 and
    the three months ended June 30, 2005, the Company made payments
    of $20,000 and $60,059, respectively pursuant to this agreement.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;17&nbsp;-&nbsp;<U>COMMITMENTS AND
CONTINGENCIES</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    A.</TD>
    <TD></TD>
    <TD valign="top">
    The Company has entered into a supply agreement with Irish
    Distillers Limited (&#147;Irish Distillers&#148;), 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&nbsp;31,
    2005, the Company has committed to purchase approximately
    <FONT face="times new roman,times">&#128;</FONT>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.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    B.</TD>
    <TD></TD>
    <TD valign="top">
    The Company has entered into a distribution agreement with
    Gaelic Heritage Corporation, Ltd. (&#147;Gaelic&#148;), an
    international supplier, to be the sole-producer of Celtic
    Crossing, one of the Company&#146;s products, for an indefinite
    period.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    C.</TD>
    <TD></TD>
    <TD valign="top">
    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</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-34

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;17&nbsp;-&nbsp;<U>COMMITMENTS AND CONTINGENCIES
(CONT&#146;D)</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Castle Brands achievement of contractual case sale targets. The
    agreement expires on December&nbsp;31, 2009.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    D.</TD>
    <TD></TD>
    <TD valign="top">
    In September 2004, CB-USA entered into an exclusive distribution
    agreement with Gosling&#146;s Export (Bermuda) Limited
    (&#147;GXB&#148;) to be the sole and exclusive importer of
    Gosling&#146;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&nbsp;19).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    E.</TD>
    <TD></TD>
    <TD valign="top">
    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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    F.</TD>
    <TD></TD>
    <TD valign="top">
    In June 2004, the Company executed subleases for office space in
    Dublin, Ireland and midtown Manhattan. The Dublin office lease
    commenced on June&nbsp;1, 2004 and extends through
    February&nbsp;28, 2009. Rent is payable quarterly in advance.
    The New York City lease commenced on August&nbsp;15, 2004 and
    extends through March&nbsp;30, 2008. The Company has also
    entered into non-cancelable operating leases for certain office
    equipment.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Future minimum lease payments are as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 11pt;">
    <TD align="center" nowrap>For the years ending</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 11pt;">
    <TD align="center" nowrap>March&nbsp;31,</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Amount</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>292,773</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>302,634</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>302,634</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,021</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,581</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,046,643</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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 $290,000, $70,000 and $60,000
    and $90,000 and $50,000 for the years ended March&nbsp;31, 2005,
    2004 and 2003, and the three months ended June&nbsp;30, 2005 and
    2004, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    G.</TD>
    <TD></TD>
    <TD valign="top">
    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</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-35

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;17&nbsp;-&nbsp;<U>COMMITMENTS AND CONTINGENCIES
(CONT&#146;D)</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    owns 60% of the Celtic Crossing brand in the United States, has
    the option to purchase&nbsp;70% of the brand outside the United
    States from Gaelic.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
    H.</TD>
    <TD></TD>
    <TD valign="top">
    The Company is subject to strict federal and state government
    regulations associated with the marketing, import, warehouse,
    transport, and distributions of spirits.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;18&nbsp;-&nbsp;<U>CONCENTRATION OF CREDIT
RISK</U></B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The Company maintains its cash balances at various large
    financial institutions that, at times, may exceed federally and
    internationally insured limits. As of March&nbsp;31, 2004 and
    2005, and June&nbsp;30, 2004 and 2005, the Company exceeded the
    insured limit by approximately $6,100,000 and $5,700,000, and
    $2,400,000 and $5,100,000, 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.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;19&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>GOSLING-CASTLE PARTNERS INC. EXPORT AGREEMENT WITH
    GOSLING&#146;S EXPORT (BERMUDA)&nbsp;LIMITED</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In February 2005, Gosling Partners Inc. secured the GXB global
    distribution rights under an Export Agreement (&#147;the
    Agreement&#148;) 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&nbsp;1, 2005,
    October&nbsp;1, 2005, April&nbsp;1, 2006 and October&nbsp;1,
    2006. At March&nbsp;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&nbsp;31, 2005 and the three months
    ended June&nbsp;30, 2005, the Company recognized interest
    expense of $6,640 and $20,000, respectively, on this note.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In addition, under the terms of the Export Agreement, GXB has
    agreed to sell all brands in its portfolio to GCP at its
    manufacturer&#146;s cost plus a specified producer&#146;s
    profit. For the years of the agreement, the producer&#146;s
    profit is a stipulated amount per case, increasing over time.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-36

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;19&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>GOSLING-CASTLE PARTNERS INC. EXPORT AGREEMENT WITH
    GOSLING&#146;S EXPORT (BERMUDA)&nbsp;LIMITED
    (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The Export Agreement commenced on April&nbsp;1, 2005 and has a
    15&nbsp;year term. It is renewable for additional 15&nbsp;year
    terms as long as GCP meets certain case sale targets during the
    initial term as set forth in the Agreement.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;20&nbsp;-&nbsp;<U>SUBSEQUENT EVENTS</U></B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In connection with the Company&#146;s 2005 agreement to issue up
    to $10,000,000 of subordinated convertible notes to an investor
    in order to fund Gosling-Castle Partners, Inc. and for working
    capital purposes, of which $5,000,000 of notes were issued as of
    March&nbsp;31, 2005, the Company issued the remaining $5,000,000
    of convertible note in June 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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%&nbsp;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%&nbsp;per annum. The notes may be
    converted into common stock at $8&nbsp;per share at any time,
    and shall be converted automatically after the third year from
    the date of issuance on the 30th&nbsp;consecutive trading day on
    which the closing price of the common stock is no less than
    $20&nbsp;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 such discount based on the level of interest savings to the
    Company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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, it is anticipated that the value of the
    incremental shares, valued at the initial public offering price,
    will be recorded as interest expense.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In August 2005, the Company issued 362,500&nbsp;shares of
    Series&nbsp;C Preferred Stock, convertible at $8&nbsp;per share
    and raised $2.9&nbsp;million in cash.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In August 2005, the Company modified its senior note indenture
    to increase issuable notes to $10&nbsp;million, extend the term
    two years until May 2009 and to increase the interest rate from
    8% to 9%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    On August&nbsp;15, 2005, the Company, for prior services,
    authorized the issuance to a financial advisor a warrant to
    purchase up to 100,000 shares of common stock at $8.00 per share
    for a period of ten years.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-37

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;20&nbsp;-&nbsp;<U>SUBSEQUENT EVENTS
(CONT&#146;D)</U></B>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The warrant issued on December&nbsp;1, 2003 in connection with
    the Company&#146;s revolving credit facility (See Note&nbsp;15,
    B., above) was subsequently amended to amend the warrant
    holder&#146;s registration rights with respect to the
    Company&#146;s initial public offering, eliminate a cash put to
    the Company and provide certain penalties if the shares
    underlying the warrants have not been registered by June 2007
    and June&nbsp;2008.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In connection with the acquisition of the Company&#146;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 and issue options to purchase
    20,000 shares of its common stock to employees of GCP.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In connection with our amended and restated warrant agreement
    with Keltic Financial Partners, LP for the purchase of 100,000
    shares of our common stock, we have agreed that if on either
    June&nbsp;1, 2007 or June&nbsp;1, 2008 (a)&nbsp;there are shares
    of common stock received or issuable upon the exercise of the
    warrant that have not been registered and (b)&nbsp;we have not
    filed a registration statement with respect to which Keltic had
    the opportunity to register the unregistered shares, we shall
    pay Keltic $100,000 within ten (10) days of such date.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;21&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>GEOGRAPHIC INFORMATION</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    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.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="21%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap>Years Ended</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>Three</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>Months Ended</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>March&nbsp;31</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>June&nbsp;30</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>%</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2004</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>%</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>%</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2005</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>%</TD><TD></TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="30" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Revenue:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ireland, United Kingdom and Canada</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>603,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,995,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,891,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,651,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.7%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,815,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,831,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,726,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,847,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63.3%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Consolidated Revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,419,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,826,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,617,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,498,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ireland&nbsp;&#38; United Kingdom</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>698,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,032,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.9%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,823,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,521,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.6%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,924,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,726,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,432,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88.8%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,433,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87.4%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Consolidated Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,622,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,758,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>43,255,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>43,955,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-38

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS INC. AND SUBSIDIARIES
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes to Financial Statements
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Fiscal Years Ended March&nbsp;31, 2003, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 11pt;">
Unaudited with Respect to June&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;22&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>INITIAL PUBLIC OFFERING</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    On September&nbsp;15, 2005, the Company&#146;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&#146;s common stock.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-39

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS SPIRITS COMPANY LIMITED</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>(formerly known as The Roaring Water Bay Spirits Company
Limited)</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Directors&#146; Report and Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Year Ended&nbsp;31&nbsp;December 2003</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<I>Registered number&nbsp;&nbsp;&nbsp;&nbsp;274814</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 27pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y12717y1271705.gif" alt="(BDO LOGO)">
</DIV>

<P align="center" style="font-size: 11pt;">F-40

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS SPIRITS COMPANY LIMITED</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Directors&#146; Report and Financial Statements</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Contents</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#302'>Directors&#146; report</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#303'>Statement of directors&#146;
    responsibilities</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-44</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#304'>Auditors&#146; report</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#305'>Statement of accounting policies</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-47</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#306'>Profit and loss account</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#307'>Balance sheet</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#308'>Cash flow statement</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-51</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#309'>Notes on and forming part of the financial
    statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-52</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 11pt;">F-41

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='302'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CASTLE BRANDS SPIRITS COMPANY LIMITED</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS SPIRITS COMPANY LIMITED</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Directors&#146; Report</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The directors present their annual report and audited financial
statements for the year ended 31&nbsp;December 2003.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Principal activities, business review and future
developments</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The principal activity of the company is the manufacture and
development of a range of Irish spirit brands for the Irish and
International markets. These include Boru Vodka, Clontarf Irish
Whiskey and O&#146;Leary&#146;s Irish Cream.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Castle Brands Spirits Company Limited is a subsidiary of Castle
Brands Spirits Group Limited, a company registered in Ireland,
having its registered office at 4&nbsp;Herbert Place, Herbert
Street, Dublin&nbsp;2.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Boru Vodka Company Limited, The Clontarf Irish Whiskey
Company and Castle Brands Whiskey Company Limited are wholly
owned subsidiaries of the company. All of the companies are
dormant and have their registered offices at 4&nbsp;Herbert
Place, Herbert Street, Dublin&nbsp;2.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On 1&nbsp;December, 2003 all of the issued share capital of the
parent company, Castle Brands Spirits Group Limited, was
acquired by Castle Brands Inc. a Delaware corporation.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The company changed its name from The Roaring Water Bay Spirits
Company Limited to Castle Brands Spirits Company Limited with
effect from 28&nbsp;January 2004.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results and dividends</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The profit and loss account, balance sheet and cash flow
statement for the year ended 31&nbsp;December 2003 are set out
on pages&nbsp;F-49 to F-51.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="85%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    The loss for the financial year amounted to</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(46,887</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Profit and loss account at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(582,288</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Profit and loss account at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(629,175</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The directors do not recommend payment of a final dividend.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Post balance sheet events</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There have been no significant events since the year end, which
would have an impact on the financial position at
31&nbsp;December 2003.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Future developments</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The directors are confident about the coming year, with a number
of exciting developmental opportunities in new and existing
markets that will deliver sustained organic growth for the
company.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interests of directors and secretary</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The interests of the directors and the secretary of the company
who are also directors of the ultimate parent undertaking,
Castle Brands Inc., in the shares of Castle Brands Inc. are
stated in the financial statements of that company.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Health and safety of employees</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
It is the policy of the company to ensure the health and welfare
of employees by maintaining a safe place and system of work.
This policy is based on the requirements of employment
legislation, including the Safety, Health and Welfare at Work
Act, 1989.
</DIV>

<P align="center" style="font-size: 11pt;">F-42
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt;">
<B>CASTLE BRANDS SPIRITS COMPANY LIMITED</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Directors&#146; Report</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Books of account</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The measures taken by the directors to ensure compliance with
the requirements of Section&nbsp;202, Companies Act, 1990,
regarding proper books of account are the implementation of
necessary policies and procedures for recording transactions,
the employment of competent accounting personnel with
appropriate expertise and the provision of adequate resources to
the financial function. The books of account are maintained at
4&nbsp;Herbert Place, Herbert Street, Dublin&nbsp;2.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Auditors</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The auditors, BDO Simpson Xavier, Registered Auditors, have
indicated their willingness to continue in office in accordance
with the provisions of Section&nbsp;l60(2) of the Companies Act,
1963.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On behalf of the board:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 48pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/&nbsp;&nbsp;Patrick Rigney</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    /s/&nbsp;&nbsp;David Phelan</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B>Patrick Rigney<BR>
     </B><I>Director</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>David Phelan<BR>
     </B><I>Director</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date&nbsp;June&nbsp;2, 2004
</DIV>

<P align="center" style="font-size: 11pt;">F-43
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS SPIRITS COMPANY LIMITED</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='303'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">Statement of Directors&#146; Responsibilities</FONT>" -->

<DIV align="center" style="font-size: 11pt;">
<B>Statement of Directors&#146; Responsibilities</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Irish company law requires the directors to prepare financial
statements for each financial period which give a true and fair
view of the state of affairs of the company and of the profit or
loss for that period. In preparing those financial statements,
the directors are required to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    select suitable accounting policies and then apply them
    consistently</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make judgements and estimates that are reasonable and prudent</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prepare the financial statements on the going concern basis
    unless it is inappropriate to presume that the company will
    continue in business</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The directors are responsible for keeping proper books of
account which disclose with reasonable accuracy at any time the
financial position of the company and to enable them to ensure
that the financial statements are prepared in accordance with
accounting standards generally accepted in Ireland and comply
with the Companies Acts, 1963 to 2003. They have general
responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the company and to prevent and
detect fraud and other irregularities.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On behalf of the board:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 48pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ Patrick Rigney</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    /s/ David Phelan</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B>Patrick Rigney<BR>
     </B><I>Director</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>David Phelan<BR>
     </B><I>Director</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Date&nbsp;June&nbsp;2, 2004</I>
</DIV>

<P align="center" style="font-size: 11pt;">F-44
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<IMG src="y12717y1271702.gif" alt="BDO SIMPSON XAVIER LOGO">
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='304'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">Independent Auditors&#146; report to the members of Castle Brands Spirits Company Limited</FONT>" -->

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Independent Auditors&#146; report to the members of Castle
Brands Spirits Company Limited</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the financial statements on pages F-47 to F-64
which comprise the Profit and Loss Account, the Balance Sheet,
the Cash Flow Statement and related notes. These financial
statements have been prepared under the historical cost
convention and in accordance with the accounting policies set
out on pages F-47 to F-48.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Respective responsibilities of directors and auditors in
relation to the financial statements</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The directors are responsible for preparing the annual report.
As described on page&nbsp;F-44, this includes responsibility for
preparing the financial statements in accordance with accounting
standards generally accepted in Ireland. Our responsibilities,
as independent auditors, is to audit the financial statements in
accordance with relevant legal and regulatory requirements and
generally accepted auditing standards in Ireland and the United
States of America.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We report to you our opinion as to whether the financial
statements are presented fairly, in all material respects, and
are properly prepared in accordance with the Companies Acts. We
also report to you whether in our opinion: proper books of
account have been kept by the company; whether, at the balance
sheet date, there exists a financial situation which may require
the convening of an extraordinary general meeting of the
company; and whether the information given in the
directors&#146; report is consistent with the financial
statements. In addition, we state whether we have obtained all
the information and explanations necessary for the purposes of
our audit and whether the financial statements are in agreement
with the books of account.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We report to you, if, in our opinion, any information specified
by law regarding directors&#146; remuneration and
directors&#146; transactions is not given and, where
practicable, include such information in our report.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We read the other information contained in the annual report and
consider whether it is consistent with the audited financial
statements. We consider the implications for our report if we
become aware of any apparent misstatements or material
inconsistencies with the financial statements.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of audit opinion</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audit in accordance with generally accepted
auditing standards in Ireland and the United States of America.
An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant
estimates and judgements made by the directors in the
preparation of the financial statements, and of whether
</DIV>

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<DIV align="center" style="font-size: 10pt;">
<IMG src="y12717y1271703.gif" alt="BDO INFORMATION">
</DIV>

<P align="center" style="font-size: 11pt;">F-45

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<IMG src="y12717y1271704.gif" alt="BDO SIMPSON XAVIER">
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Independent Auditors&#146; report to the members of Castle
Brands Spirits Company Limited (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the accounting policies are appropriate to the company&#146;s
circumstances, consistently applied and adequately disclosed.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Opinion</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the financial statements referred to above
present fairly, in all material respects, the state of affairs
of the company at 31&nbsp;December 2003 and 31&nbsp;December
2002 and of the results for each of the years then ended and
have been properly prepared in accordance with the Companies
Acts, 1963 to 2003 and all Regulations to be construed as one
with those acts.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have obtained all the information and explanations we
considered necessary for the purposes of our audit. In our
opinion, proper books of account have been kept by the company.
The financial statements are in agreement with the books of
account.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the information given in the directors&#146;
report on pages&nbsp;F-42 and F-43 is consistent with the
financial statements.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The net assets of the company, as stated in the balance sheet on
page&nbsp;F-50, are more than half of the amount of its called
up share capital and, in our opinion, on that basis there did
not exist at 31&nbsp;December 2003 a financial situation which,
under Section&nbsp;40(1) of the Companies (Amendment) Act, 1983,
may require the convening of an extraordinary general meeting of
the company.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/ BDO Simpson Xavier
</DIV>

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<TR>
    <TD align="left" valign="top">
    <B>BDO Simpson Xavier</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>Date </B>3rd June 2004</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <I>Registered Auditors</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <I>Dublin, Ireland</I></TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-46

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='305'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CASTLE BRANDS SPIRITS COMPANY LIMITED</FONT>" -->

<DIV align="center" style="font-size: 12pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Statement of Accounting Policies
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following accounting policies have been applied consistently
in dealing with items which are considered material in relation
to the company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of preparation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements have been prepared on a going concern
basis under the historical cost convention and comply with the
requirements of Irish statute comprising the Companies Acts,
1963 to 2003, and with financial reporting standards of the
Accounting Standards Board, as promulgated by the Institute of
Chartered Accountants in Ireland.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Turnover</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Turnover, all of which arises from continuing operations,
represents the value of goods and services at invoice value,
exclusive of excise duty, value added tax and trade discounts,
and inclusive of royalty income.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Tangible fixed assets and depreciation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Tangible fixed assets are stated at cost, less accumulated
depreciation. The charge for depreciation is calculated to write
down the cost of tangible fixed assets to their estimated
residual values by equal annual installments over their expected
useful lives, which are as follows:
</DIV>

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<TR style="font-size: 1pt;">
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    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>25 years</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>7 years</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Office equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>4 years</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computer equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>4&nbsp;years</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Motor vehicles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>4 years</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>lntangible assets</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Intangible assets represent patents and internally developed
trademarks. The directors have elected to amortise intangible
assets over a useful economic life of five years.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Deferred development expenditure</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Expenditure for Boru Vodka, Clontarf Whiskey and
O&#146;Leary&#146;s Cream brands, design, product development,
market research, copyright, trademarks, patents, organization
and tooling has been deferred and is amortised over a period of
five years.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Financial assets</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Investments in subsidiary undertakings</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Investments in subsidiary undertakings are carried at cost less
provisions for impairments in value.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock and work in progress</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stocks are stated at the lower of cost and net realisable value.
Cost comprises purchase price, including freight and duty, and
in the case of work in progress and finished goods, all directly
related production overheads. Net realisable value comprises
estimated sales value less all further costs to completion and
further marketing, selling, and distribution costs.
</DIV>

<P align="center" style="font-size: 11pt;">F-47
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<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Statement of Accounting Policies
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Foreign currencies</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements are expressed in Euro
(<FONT face="times new roman,times">&#128;</FONT>).
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Transactions in foreign currencies are recorded at the rate
ruling at the date of the transaction or at a contracted rate.
The resulting monetary assets and liabilities are translated at
the balance sheet rate or the contracted rate and the exchange
differences are dealt with in the profit and loss account.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Taxation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The charge for taxation is based on the profit or loss for the
year.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred taxation is accounted for in respect of timing
differences between profit as computed for taxation purposes and
profit as stated in the financial statements to the extent that
such differences are expected to reverse in the foreseeable
future.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Leased assets</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Assets obtained under hire purchase contracts and finance leases
are capitalised as tangible assets and depreciated over the
shorter of the lease term and their useful lives. Obligations
under such agreements are included in creditors net of finance
charge allocated to future periods. The interest element of the
rental payment is charged to the profit and loss account so as
to produce a constant periodic rate of charge.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rentals payable under operating leases are charged against
income on a straight line basis over the lease term.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Pensions</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The company operates a defined contribution pension scheme.
Contributions to the scheme are expensed as incurred.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Government grants</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenue based grants are credited to the profit and loss account
to offset the matching expenditure in the period to which they
belong.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Grants that relate to specific capital expenditure are treated
as deferred income, which is then credited to the profit and
loss account over the related asset&#146;s useful life.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Media production</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fixed costs of media production are deferred over a period
of three years which is the expected useful life of the
production.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Consolidation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The company is a subsidiary of an EU parent and is therefore
exempt from the requirement to prepare consolidated financial
statements by virtue of Regulation 9 of the European Communities
(Companies: Group Accounts) Regulations, 1992. Consequently
these financial statements deal with the results of the company
as a single entity.
</DIV>

<P align="center" style="font-size: 11pt;">F-48

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<DIV align="center" style="font-size: 7pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS SPIRITS COMPANY LIMITED</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='306'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">PROFIT AND LOSS ACCOUNT</FONT>" -->

<DIV align="center" style="font-size: 7pt;">
<B>PROFIT AND LOSS ACCOUNT</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<B>For the Year Ended 31&nbsp;December 2003</B>
</DIV>

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    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Note</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Turnover</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>5,569,866</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,726,551</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(2,848,965</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,012,243</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Gross profit</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,720,901</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,714,308</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Administration expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(1,297,409</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,542,813</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and distribution expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(1,362,634</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,013,716</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating profit</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>60,858</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,779</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest payable and similar charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(99,945</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111,360</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(Loss)/profit on ordinary activities before taxation</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(39,087</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,419</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax on (loss)/profit on ordinary activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(7,800</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,829</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(Loss)/profit for the financial year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(46,887</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,248</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Profit and loss account at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(582,288</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(653,536</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Profit and loss account at end of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(629,175</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(582,288</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The company had no recognised gains or losses for the year or
prior year, other than the loss noted in the profit and loss
account.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There is no material difference between the loss on ordinary
activities before taxation and the retained loss reported in the
profit and loss account and the equivalent figures calculated on
the historical cost basis.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes form an integral part of this profit and
loss account.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On behalf of the board:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 48pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    /s/ Patrick Rigney</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    /s/ David Phelan</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Patrick Rigney</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>David Phelan</B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <I>Director</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date&nbsp;June&nbsp;2, 2004
</DIV>

<P align="center" style="font-size: 11pt;">F-49
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 7pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS SPIRITS COMPANY LIMITED</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='307'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">BALANCE SHEET</FONT>" -->

<DIV align="center" style="font-size: 7pt;">
<B>BALANCE SHEET</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<B>At 31&nbsp;December 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Note</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Fixed assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>271,680</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>372,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>24,215</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>107,564</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>140,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred development expenditure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financial assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>403,468</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>547,764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Current assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stocks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>882,057</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>887,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debtors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3,166,138</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,442,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash at bank and in hand</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>229,564</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>4,277,759</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,390,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Creditors: </B>amounts falling due within one year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(3,328,775</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,280,706</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net current assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>948,984</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,109,506</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total assets less current liabilities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,352,452</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,657,270</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Creditors: </B>amounts falling due after one year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(632,986</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(895,088</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(7,593</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,192</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provisions for liabilities and charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(6,770</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>705,103</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>751,990</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Financed by:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Capital and reserves</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Called up share capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>771,274</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>771,274</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital conversion reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>7,127</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share premium</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>555,877</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,877</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Profit and loss account</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(629,175</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(582,288</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; funds</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>705,103</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>751,990</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes from an integral part of this balance
sheet.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On behalf of the board.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 48pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    /s/ Patrick Rigney</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    /s/ David Phelan</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Patrick Rigney</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>David Phelan</B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <I>Director</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt;">
Date&nbsp;June&nbsp;2, 2004
</DIV>

<P align="center" style="font-size: 11pt;">F-50
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 7pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CASTLE BRANDS SPIRITS COMPANY LIMITED</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='308'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">CASH FLOW STATEMENT</FONT>" -->

<DIV align="center" style="font-size: 7pt;">
<B>CASH FLOW STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<B>For the Year Ended 31&nbsp;December, 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Note</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net cash inflow/(outflow) from operating activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>559,892</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(474,948</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Servicing of finance and returns on investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(99,945</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111,360</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Taxation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>24,249</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62,907</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures and financial investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(77,502</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(124,819</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net cash inflow/(outflow) before use of liquid resources and
    financing</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>406,694</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(774,034</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(99,987</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>878,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Increase in cash</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>306,707</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,086</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 7pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<B>For the Year Ended 31&nbsp;December, 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Note</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Increase in cash</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>306,707</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,086</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease/(increase) in net debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>99,987</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(623,120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Movement in net debt during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>406,694</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(519,034</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (debt) at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(2,178,125</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,659,091</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net (debt) at end of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(1,771,431</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,178,125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-51

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='309'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">Notes on and forming part of the Financial Statements</FONT>" -->

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31&nbsp;December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;1&nbsp;-&nbsp;<U>TURNOVER</U></B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Turnover is derived entirely from the sale of alcoholic spirits
    in Ireland and abroad, and includes royalty income from Great
    Spirits Company LLC, a distributor of the products of Castle
    Brands Spirits Company Limited.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;2&nbsp;-&nbsp;<U>INTEREST PAYABLE AND SIMILAR
CHARGES</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank
    interest and charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>85,179</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99,893</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finance
    lease interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>14,766</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,467</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>99,945</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;3&nbsp;-&nbsp;<U>STATUTORY AND OTHER
INFORMATION</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Auditors&#146;
    remuneration, including expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>17,500</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Directors&#146;
    remuneration and other emoluments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>184,158</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170,596</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government
    grants received</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(40,502</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Depreciation
    and amortisation of:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Owned
    tangible fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>52,041</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,242</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leased
    tangible fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>63,299</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,634</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
    development expenditure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>88,677</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,538</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible
    assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>17,781</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,295</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Media
    production</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,344</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital
    grants received</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(2,599</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;4&nbsp;-&nbsp;<U>TAX ON PROFIT ON ORDINARY
ACTIVITIES</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Overprovision
    from previous year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24,829</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
    tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>6,770</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax
    credit on medical insurance repayable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,030</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>7,800</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24,829</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    There is no charge for corporation tax due to losses incurred in
    the year. The company is liable to corporation tax on profits
    from its operating activities at the reduced manufacturing rate
    of 10%. Manufacturing relief is due to expire on
    31&nbsp;December 2010.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-52

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;5&nbsp;-&nbsp;<U>STAFF NUMBERS AND COSTS</U></B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The average number of persons employed by the company during the
    year, analysed by category, was as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>Number of</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap>employees</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>No.</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>No.</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Administration</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling
    and distribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>13</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The aggregate payroll costs of these persons were as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Salaries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>492,204</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>661,024</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Social
    welfare costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>38,582</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,930</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pension
    costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>36,621</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,006</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>567,407</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>737,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-53

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;6&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>TANGIBLE FIXED ASSETS</U></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Land and</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Plant and</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Office</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Computer</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Motor</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>buildings</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>equipment</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>equipment</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>equipment</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>vehicles</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Total</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Cost</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>238,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>567,591</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additions
    in year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,374</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>At
    end of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>5,116</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>246,033</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>6,595</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>71,023</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>253,198</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>581,965</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Depreciation</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>194,945</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Charge
    for year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115,340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>At
    end of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,185</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>120,177</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>5,110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>53,736</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>130,077</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>310,285</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Net
    book value</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    31&nbsp;December 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3,931</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>125,856</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,485</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>17,287</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>123,121</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>271,680</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    31&nbsp;December 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>4,136</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>155,159</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,081</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>24,850</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>186,420</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>372,646</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Included in the net book value of tangible assets are motor
    vehicles held under finance leases amounting to
    <FONT face="times new roman,times">&#128;</FONT>123,121
    (2002:<FONT face="times new roman,times">&#128;</FONT>186,420).
    The depreciation charge in respect of these leased assets
    amounts to
    <FONT face="times new roman,times">&#128;</FONT>63,299
    (2002:<FONT face="times new roman,times">&#128;</FONT>67,634).</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-54

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;7&nbsp;-&nbsp;<U>INTANGIBLE ASSETS</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Trademarks</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>and patents</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Cost</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,471</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additions
    in year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,434</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>At
    end of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>88,905</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Depreciation</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,909</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Charge
    for year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,781</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>At
    end of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,690</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Net
    book value</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    31&nbsp;December 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>24,215</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    31&nbsp;December 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,562</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Intangible assets represent patents and internally developed
    trademarks. The directors have elected to amortise intangible
    assets over a useful economic life of five years.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;8&nbsp;-&nbsp;<U>DEFERRED DEVELOPMENT
EXPENDITURE</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance
    at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>140,547</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>192,345</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development
    expenditure incurred during the year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>55,694</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,740</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortisation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(88,677</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(77,538</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance
    at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>107,564</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>140,547</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Expenditure for Boru Vodka, Clontarf Whiskey and
    O&#146;Leary&#146;s Cream brands, design, product development,
    market research, copyright, trademarks, patents, organization
    and tooling has been deferred and is amortised over a period of
    five years.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-55

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;9&nbsp;-&nbsp;<U>FINANCIAL ASSETS</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
    in</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Boru Vodka Company Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Clontarf Irish Whiskey Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Whiskey Company Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The Boru Vodka Company Limited, The Clontarf Irish Whiskey
    Company and Castle Brands Whiskey Company Limited all have their
    registered offices at 4 Herbert Place, Herbert Street, Dublin 2.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <B><I>Activities</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    All three companies are 100% subsidiaries of Castle Brands
    Spirits Company Limited. At present all three are dormant.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;10&nbsp;-&nbsp;<U>STOCKS</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Raw
    materials</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>289,590</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>686,770</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finished
    Goods</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>592,467</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200,488</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>882,057</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>887,258</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    There are no material differences between the replacement cost
    of stock and the balance sheet amounts.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;11&nbsp;-&nbsp;<U>DEBTORS</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
    debtors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,612,657</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,366,228</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepayments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>139,248</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171,639</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
    debtors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>51,421</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,616</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts
    owed by related companies (note&nbsp;25)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,191,483</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>656,635</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VAT
    receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>171,329</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183,725</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3,166,138</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,442,843</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-56

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;12&nbsp;-&nbsp;<U>CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
    creditors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,429,819</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,196,665</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
    creditors including tax and social welfare</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>47,139</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accruals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>483,808</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>649,207</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts
    due under finance leases (note&nbsp;14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>145,115</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,926</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts
    owned to related companies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank
    loan and overdraft (note&nbsp;14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>552,244</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>290,141</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
    finance (note&nbsp;14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>670,650</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,005,081</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3,328,775</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,280,706</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Taxation
    creditors</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxation
    and social welfare included in other creditors:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PAYE/PRSI</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>34,950</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporation
    tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24,249</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Withholding
    tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>12,189</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>47,139</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;13&nbsp;-&nbsp;<U>CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts
    due under finance lease (note&nbsp;14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160,365</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146;
    loans (note&nbsp;14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>444,408</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>419,775</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank
    loan (note&nbsp;14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>188,578</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>314,948</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>632,986</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>895,088</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-57

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;14&nbsp;-&nbsp;<U>DETAILS OF BORROWINGS</U></B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    <B><I>Maturity analysis</I></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Within</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Between one</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Between two</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>one year</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#38; two years</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#38; five years</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Total</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <I>Repayable by installments</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Obligations under finance leases and hire purchase contracts</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,115</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <I>Repayable other than by installments</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Bank loan and overdraft</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>552,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>740,822</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Trade finance</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>670,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>670,650</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Shareholders&#146; loans</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>444,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>444,408</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,368,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>564,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000,995</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    <B><U>Security</U></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    The company has granted an All Monies Debenture dated
    4&nbsp;February, 2000 giving a first floating charge over the
    assets of the company including all intellectual property rights
    to Ulster Bank Limited. A Letter of Waiver over the trade
    debtors dated 31&nbsp;October, 2000 was issued to Ulster Bank
    Commercial Services Limited in respect of facilities maintained
    with them.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The company has granted an All Monies general counter indemnity
    dated 29&nbsp;January, 2001 together with supporting resolution
    to Ulster Bank Limited.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    David Phelan and Patrick Rigney have signed a joint and several
    letter of guarantee in the amount of
    <FONT face="times new roman,times">&#128;</FONT>158,717 in
    favour of Ulster Bank Limited.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    A deed of postponement dated 19&nbsp;September, 1999 over the
    shareholders&#146; loans in the amount of
    <FONT face="times new roman,times">&#128;</FONT>253,948 has been
    signed in favour of Ulster Bank Limited.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Castle Brands Inc. has guaranteed the repayment of the
    shareholders&#146; loans under the terms of the Agreement of
    Merger and Acquisitions.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-58
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;15&nbsp;-&nbsp;<U>DEFERRED INCOME</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Capital
    grants</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    the beginning of the year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,873</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortised
    during the year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,599</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    end of year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    A liability may arise to repay, in whole or in part, revenue
    grants received to date amounting
    to&nbsp;<FONT face="times new roman,times">&#128;</FONT>93,040,
    if certain events occur as detailed in the grant agreements. The
    terms of repayments are as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    <B><I>Feasibility Grant:</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    &#149;&nbsp;The company&#146;s liability for repayment of
    feasibility study grant paid in any year shall terminate five
    years from the end of that year and;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    &#149;&nbsp;The agreement shall terminate five years from the
    date of the last payment from the grants. The grant agreement
    start date was 23rd&nbsp;July 2000.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;16&nbsp;-&nbsp;&nbsp;</B></TD>
    <TD align="left">
    <B><U>PROVISIONS FOR LIABILITIES AND CHARGES</U></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Deferred
    taxation</I></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    the beginning of year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Charged
    to the profit and loss account</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    end of year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Deferred
    taxation</I></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    amounts provided for deferred taxation are set out below.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Difference
    between accumulated depreciation and amortisation and capital
    allowances</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-59

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;17&nbsp;-&nbsp;<U>CALLED UP SHARE CAPITAL</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Authorised</I></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;796,000
    (2001: 1,000,000) Ordinary shares of
    <FONT face="times new roman,times">&#128;</FONT>1.25 each</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>995,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>995,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,000
    Class &#147;A&#148; Ordinary shares of
    <FONT face="times new roman,times">&#128;</FONT>0.01 each</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>200</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Reclassification
    of 204,000 Ordinary shares</I></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,550,000
    Class&nbsp;&#147;B&#148; Ordinary shares of
    <FONT face="times new roman,times">&#128;</FONT>0.10 each</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>255,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>255,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,250,200</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,250,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Issued,
    allotted and fully paid</I></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>At
    1&nbsp;December 2003</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;412,947
    ordinary shares of
    <FONT face="times new roman,times">&#128;</FONT>1.25 each</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>516,184</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>458,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2002:
    361,110 ordinary shares of
    <FONT face="times new roman,times">&#128;</FONT>1.269738 each)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,000
    &#147;A&#148; ordinary shares of
    <FONT face="times new roman,times">&#128;</FONT>0.01 each</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>90</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,550,000
    &#147;B&#148; ordinary shares of
    <FONT face="times new roman,times">&#128;</FONT>0.10 each</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>255,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Issued
    during the year</I></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debenture
    converted</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,796</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,000
    &#147;A&#148; ordinary shares of
    <FONT face="times new roman,times">&#128;</FONT>0.01 each</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,550,000
    &#147;B&#148; ordinary shares of
    <FONT face="times new roman,times">&#128;</FONT>0.10 each</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>255,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Renominalisation
    of share capital</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,127</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    31&nbsp;December 2003</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>771,274</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>771,274</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    <B>Rights of ordinary shares</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    The &#147;A&#148; ordinary shares and the &#147;B&#148; ordinary
    shares rank pari passu in all respects.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;18&nbsp;-&nbsp;<U>RESERVES</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Capital conversion</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Share</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Profit and</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>reserve</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>premium</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>loss account</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Total</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    beginning of year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(582,288</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,284</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss
    for the financial year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(46,887</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(46,887</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="17">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    end of year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(629,175</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(66,171</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-60

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;19&nbsp;-&nbsp;<U>RECONCILIATION OF MOVEMENT IN
SHAREHOLDERS&#146; FUNDS</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146;
    funds at beginning of year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>751,990</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>425,742</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Loss)/profit
    for the financial year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(46,887</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,248</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debenture
    converted</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(253,948</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ordinary
    shares issued</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,886</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Renominalisation
    of share capital</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,127</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital
    conversion reserve</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase
    in share premium</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,062</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146;
    funds at end of year</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>705,103</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>751,990</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;20&nbsp;-&nbsp;<U>COMMITMENTS</U></B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    <B><I>Capital commitments</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B><I> </I></B></TD>
    <TD></TD>
    <TD valign="top">
    There were no capital commitments of a significant nature
    authorised at the balance sheet date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    <B><I>Operating lease commitments</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B><I> </I></B></TD>
    <TD></TD>
    <TD valign="top">
    Annual commitments exist under non-cancellable operating leases
    as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003 Motor</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002 Motor</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>vehicles</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Other</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>vehicles</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Other</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Expiring:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Between two and five years</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,747</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;21&nbsp;-&nbsp;<U>PENSIONS</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    The company operates a defined contribution pension scheme. The
    assets of the scheme are held separately from those of the
    company is an independently administered fund. The pension cost
    charge represents contributions payable by the company to the
    fund and amounted to
    <FONT face="times new roman,times">&#128;</FONT>36,621 (2002:
    <FONT face="times new roman,times">&#128;</FONT>34,006).</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-61

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;22&nbsp;-&nbsp;<U>RECONCILIATION OF OPERATING
PROFIT TO NET CASH INFLOW FROM </U> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>OPERATING
ACTIVITIES</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating
    profit</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>60,858</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>157,779</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
    of tangible fixed assets, amortization of intangible<BR>
     &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;assets,
    deferred development expenditure and government grants</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>219,199</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>208,028</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Profit
    on disposal of leased assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>(13,257</TD>
    <TD align="left" valign="top" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease/(increase)
    in stocks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>5,201</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>(233,360</TD>
    <TD align="left" valign="top" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease/(increase)
    in debtors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>287,864</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>(782,154</TD>
    <TD align="left" valign="top" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease)/increase
    in creditors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>(13,230</B></TD>
    <TD align="left" valign="top" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>188,016</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Net
    cash inflow/(outflow) from operating activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>559,892</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>(474,948</TD>
    <TD align="left" valign="top" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;23&nbsp;-&nbsp;<U>ANALYSIS OF CASH FLOWS FOR
HEADINGS NETTED IN THE CASH FLOW STATEMENT</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Returns
    on investment and servicing of finance</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
    paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(85,179</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(99,893</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
    element of finance lease repayments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(14,766</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,467</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Net
    cash (outflow)&nbsp;for returns on investment and servicing
    of<BR>
    <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;finance</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(99,945</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111,360</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Taxation</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax
    repaid/(paid)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>24,249</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62,907</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Capital
    expenditure and financial investment</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase
    of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(77,502</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(178,905</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Disposal
    of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,086</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Net
    cash outflow for capital expenditure and financial investment</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(77,502</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(124,819</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Financing</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital
    element of finance lease repayments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(63,176</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50,991</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans
    received during year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>674,111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans
    repaid during the year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(36,811</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share
    capital issue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>255,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Total
    financing cash flows</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(99,987</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>878,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-62
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;24&nbsp;-&nbsp;<U>ANALYSIS OF NET DEBT</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>Bank and</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>Tradefinance</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>Cash at bank</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>shareholder</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>and bank</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>Finance</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>and in hand</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>loans</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>overdrafts</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>lease</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>Total</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    At 1&nbsp;January 2003</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(734,723</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,295,222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(208,291</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,178,125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Cash flows</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>406,694</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    At 31&nbsp;December 2003</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>229,564</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(697,912</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(1,157,968</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(145,115</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(1,771,431</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;25&nbsp;-&nbsp;<U>RELATED PARTY TRANSACTIONS</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    The following entities are considered to be related parties for
    the purposes of Financial Reporting Standard No.&nbsp;8&nbsp;-
    &#147;Related Party Disclosures&#148;:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap>&nbsp;Entity</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Relationship</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Inc (a Delaware Corporation)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Ultimate parent undertaking</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Spirits Group
    Limited<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Irish
    registered undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Immediate parent undertaking</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Boru Vodka Company
    Limited<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Irish
    registered undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Subsidiary undertaking</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Clontarf Irish Whiskey
    Company<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Irish
    registered undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Subsidiary undertaking</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Whiskey Company
    Limited<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Irish
    registered undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Subsidiary undertaking</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Spirits Marketing and Sales Company
    Limited<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Irish
    registered undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Roaring Water Bay Spirits Company (GB)
    Limited<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(UK&nbsp;registered
    undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Roaring Water Bay Spirits Company (NI)
    Limited<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(NI&nbsp;registered
    undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Great
    Spirits Company
    LLC<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a
    Delaware limited liability company)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Details of transactions with related parties during the year are
    as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap>&nbsp;Entity</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Transaction</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>Payable (receivable)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Roaring Water Bay Spirits Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Sales</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>(365,790</TD>
    <TD align="left" valign="top" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(GB)
    Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Great
    Spirits Company LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Royalties</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>(288,934</TD>
    <TD align="left" valign="top" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Great
    Spirits Company LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Sales</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>(663,038</TD>
    <TD align="left" valign="top" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-63
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
CASTLE BRANDS SPIRITS COMPANY LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31 December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;25&nbsp;-&nbsp;<U>RELATED PARTY TRANSACTIONS
(CONT&#146;D)</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap>Director</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Directors loan</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    David Phelan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>At 1 Jan 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>24,633</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Amounts repaid</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>24,633</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>At 31 Dec 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    Disclosed to note&nbsp;11 as amounts due from related
    undertakings at the balance sheet date are the following amounts:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2003</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="times new roman,times">&#128;</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Inc</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>861,544</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Spirits Group Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,613</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,613</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Roaring Water Bay Spirits Company (GB)&nbsp;Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>654,022</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Great
    Spirits Company LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>327,326</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,191,483</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>656,635</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
     </TD>
    <TD></TD>
    <TD valign="top">
    The amounts due from The roaring Water Bay Spirits Company
    (GB)&nbsp;Limited to the company at 31&nbsp;December 2003 of
    <FONT face="times new roman,times">&#128;</FONT>836,912 was
    taken over by the Ultimate parent undertaking, Castle Brands,
    Inc.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;26&nbsp;-&nbsp;<U>COMPARATIVES</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    Comparatives have been regrouped where necessary, on a basis
    consistent with the current year.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;27&nbsp;-&nbsp;<U>APPROVAL OF FINANCIAL
STATEMENTS</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="1%"></TD>
    <TD width="91%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR>
    <B> </B></TD>
    <TD></TD>
    <TD valign="top">
    The board of directors approved these financial statements on
    June&nbsp;2, 2004.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-64

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE ROARING WATER BAY SPIRITS COMPANY (GB)&nbsp;LIMITED</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Directors&#146; Report and Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Year Ended 31&nbsp;December 2003</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Registered number&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;03699502</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y12717y1271705.gif" alt="(BDO LOGO)">
</DIV>

<P align="center" style="font-size: 11pt;">F-65

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE ROARING WATER BAY SPIRITS COMPANY (GB)&nbsp;LIMITED</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Directors&#146; Report and Financial Statements</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt;">
    <TD align="left" nowrap><B>Contents</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#402'>Directors&#146; report</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#403'>Statement of directors&#146;
    responsibilities</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-69</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#404'>Auditors&#146; report</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-70</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#405'>Statement of accounting policies</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-72</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#406'>Profit and loss account</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#407'>Balance sheet</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#408'>Notes on and forming part of the financial
    statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-75</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 11pt;">F-66

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE ROARING WATER BAY SPIRITS COMPANY (GB)&nbsp;LIMITED</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='402'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">Directors&#146; Report</FONT>" -->

<DIV align="center" style="font-size: 11pt;">
<B>Directors&#146; Report</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The directors present their annual report and audited financial
statements for the year ended 31&nbsp;December 2003.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Principal activities, business review and future
developments</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The principal activity of the company is the distribution of a
range of Irish spirit brands in the United Kingdom. These
include Boru Vodka, Clontarf Irish Whiskey and
O&#146;Leary&#146;s Cream.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Roaring Water Bay Spirits Company (GB)&nbsp;Limited is a
100%&nbsp;subsidiary of Castle Brands Spirits Marketing and
Sales Company Limited, a company registered in Ireland, having
its registered office at 4 Herbert Place, Herbert Street, Dublin
2.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results and dividends</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The profit and loss account and balance sheet for the year ended
31&nbsp;December 2003 are set out on pages&nbsp;F-73 and F-74.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="85%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    The loss for the financial year amounted to</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(163,344</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Profit and loss account at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545,627</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Profit and loss account at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(708,971</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The directors do not recommend payment of a final dividend.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Post balance sheet events</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There have been no significant events since the year end, which
would have an impact on the financial position at
31&nbsp;December 2003.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Directors and their interests</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The company&#146;s articles of association do not require the
directors to retire by rotation. The present directors of the
company are Patrick Rigney, David Phelan and John Joseph Walsh.
</DIV>

<P align="center" style="font-size: 11pt;">F-67
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt;">
<B>THE ROARING WATER BAY SPIRITS COMPANY (GB)&nbsp;LIMITED</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>Directors&#146; Report</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interests of directors and secretary</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The interests of the directors and secretary of the company who
are also directors of the ultimate parent company Castle Brands
Inc., in the shares of Castle Brands Inc., are stated in the
financial statements of that company.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Auditors</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The auditors, BDO Simpson Xavier, Registered Auditors, have
indicated their willingness to continue in office and a
resolution to re-appoint them will be proposed at the annual
general meeting.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On behalf of the board:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 48pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    /s/ Patrick Rigney</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    /s/ David Phelan</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Patrick Rigney</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>David Phelan</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <I>Director</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date&nbsp;June&nbsp;3, 2004
</DIV>

<P align="center" style="font-size: 11pt;">F-68
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<P><HR noshade><P>
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<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE ROARING WATER BAY SPIRITS COMPANY (GB)&nbsp;LIMITED</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='403'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">Statement of Directors&#146; Responsibilities</FONT>" -->

<DIV align="center" style="font-size: 11pt;">
<B>Statement of Directors&#146; Responsibilities</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
United Kingdom company law requires the directors to prepare
financial statements for each financial year which give a true
and fair view of the state of affairs of the company and of the
profit or loss for that period. In preparing those financial
statements, the directors are required to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="2%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    select suitable accounting policies and then apply them
    consistently</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make judgements and estimates that are reasonable and prudent</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prepare the financial statements on the going concern basis
    unless it is inappropriate to presume that the company will
    continue in business</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The directors are responsible for keeping proper books of
account which disclose with reasonable accuracy at any time the
financial position of the company and to enable them to ensure
that the financial statements comply with the Companies Acts
1985. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the
company and to prevent and detect fraud and other irregularities.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On behalf of the board:
</DIV>

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<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    /s/ Patrick Rigney</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    /s/ David Phelan</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Patrick Rigney</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>David Phelan</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <I>Director</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date&nbsp;June&nbsp;3, 2004
</DIV>

<P align="center" style="font-size: 11pt;">F-69
<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt;">
 <IMG src="y12717y1271702.gif" alt="(BDO LETTERHEAD)">
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Independent Auditors&#146; report to the Shareholders of</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='404'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">The Roaring Water Bay Spirits Company (GB) Limited</FONT>" -->

<DIV align="center" style="font-size: 11pt;">
<B>The Roaring Water Bay Spirits Company (GB) Limited</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the financial statements on pages&nbsp;F-72 to
F-79 which comprise the Profit and Loss Account, the Balance
Sheet, and related notes. These financial statements have been
prepared under the historical cost convention and in accordance
with the accounting policies set out on pages&nbsp;F-72.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Respective responsibilities of directors and auditors</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As described on page&nbsp;F-69, the company&#146;s directors are
responsible for the preparation of the financial statements. It
is our responsibility to form an independent opinion, based on
our audit, on those statements and to report our opinion to you.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our responsibility is to audit the financial statements in
accordance with the relevant legal and regulatory requirements
and generally accepted auditing standards in the United Kingdom
and the United States of America.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We report to you our opinion as to whether the financial
statements are presented fairly, in all material respects, and
are properly prepared in accordance with Companies Act 1985. We
also report to you if, in our opinion, the Directors&#146;
Report is not consistent with the financial statements, if the
company has not kept proper accounting records, if we have not
received all the information and explanations we require for our
audit, or if information specified by law regarding
directors&#146; remuneration and transactions with the company
is not disclosed.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We read the other information contained in the annual report and
consider whether it is consistent with the audited financial
statements. We consider the implications for our report if we
become aware of any apparent misstatements or material
inconsistencies with the financial statements.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of audit opinion</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audit in accordance with generally accepted
auditing standards in the United Kingdom and the United States
of America. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the
significant estimates and, judgements made by the directors in
the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company&#146;s
circumstances, consistently applied and adequately disclosed.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="center" style="font-size: 10pt;">
<IMG src="y12717y1271703.gif" alt="(BDO LETTERHEAD)">
</DIV>

<P align="center" style="font-size: 11pt;">F-70

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<IMG src="y12717y1271704.gif" alt="(BDO SIMPSON XAVIER)">
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Independent Auditors&#146; report to the Members of</B>
</DIV>

<DIV align="center" style="font-size: 11pt;">
<B>The Roaring Water Bay Spirits Company (GB) Limited</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Opinion</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the financial statements referred to above
present fairly, in all material respects, the state of affairs
of the company at 31&nbsp;December 2003 and 31&nbsp;December
2002 and of the loss for the years then ended and have been
properly prepared in accordance with the Companies Acts, 1985
and all Regulations to be construed as one with those Acts.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have obtained all the information and explanations we
considered necessary for the purposes of our audit. In our
opinion, proper books of account have been kept by the company.
The financial statements are in agreement with the books of
account.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the information given in the directors&#146;
report on pages&nbsp;F-67 to F-68 is consistent with the
financial statements.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 48pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    /s/ BDO Simpson Xavier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>BDO Simpson Xavier</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>Date </B>3rd&nbsp;June 2004</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Registered Auditors</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <I>Dublin, Ireland</I></TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-71

<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
THE ROARING WATER BAY SPIRITS COMPANY (GB)&nbsp;LIMITED
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='405'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">Statement of Accounting Policies</FONT>" -->

<DIV align="center" style="font-size: 12pt;">
Statement of Accounting Policies
</DIV>

<DIV align="center" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31&nbsp;December 2003
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following accounting policies have been applied consistently
in dealing with items which are considered material, in relation
to the company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of preparation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements have been prepared on a going concern
basis under the historical cost convention and comply with the
requirements of the Companies Acts 1985, and with financial
reporting standards of the Accounting Standards Board.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Turnover</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Turnover, all which arises from continuing operations,
represents the value of goods and services at invoice value,
exclusive of excise duty, value added tax and trade discounts,
and inclusive of royalty income.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Tangible fixed assets and depreciation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Tangible fixed assets are stated at cost, less accumulated
depreciation. The charge for depreciation is calculated to write
down the cost of tangible fixed assets to their estimated
residual values by equal annual installments over their expected
useful lives, which are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Motor vehicles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    4&nbsp;years</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock and work in progress</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stocks are stated at the lower of cost and net realisable value.
Cost comprises purchase price, including freight and duty, and
in the case of work in progress and finished goods, all directly
related production overheads. Net realisable value comprises
estimated sales value less all further costs to completion and
further marketing, selling, and distribution costs.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Foreign currencies</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements are expressed in Sterling (&#163;).
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Transactions in foreign currencies are recorded at the rate
ruling at the date of the transactions or at a contracted rate.
The resulting monetary assets and liabilities are translated at
the balance sheet rate or the contracted rate and the exchange
differences are dealt with in the profit and loss account.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Taxation</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The charge for taxation is based on the profit or loss for the
year.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred tax is provided on all timing differences that have
originated but not reversed, at the balance sheet date. Where
transactions or events that result in an obligation to pay more
tax in the future or a right to pay less tax in the future, have
occurred at the balance sheet date.
</DIV>

<P align="center" style="font-size: 11pt;">F-72
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 7pt;">
<B>THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<B>PROFIT AND LOSS ACCOUNT</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='406'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">For the Year Ended 31 December 2003</FONT>" -->

<DIV align="center" style="font-size: 7pt;">
<B>For the Year Ended 31&nbsp;December 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Note</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Turnover</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>465,945</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>518,137</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(395,005</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(461,172</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Gross profit</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>70,940</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,965</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Administration expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(62,782</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24,509</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and distribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(166,844</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(98,612</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating loss</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(158,686</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(66,156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest payable and similar charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(4,658</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,739</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Loss on ordinary activities before taxation</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3-4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(163,344</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68,895</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax on loss on ordinary activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Loss for the financial year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(163,344</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68,895</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Profit and loss account at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(545,627</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(476,732</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Profit and loss account at end of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(708,971</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545,627</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The company had no recognised gains or losses for the year other
than the loss noted in the profit and loss account.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There is no material difference between the loss on ordinary
activities before taxation and the retained loss reported in the
profit and loss account and the equivalent figures calculated on
the historical cost basis.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes from an integral part of this profit and
loss account.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On behalf of the board:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 48pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ Patrick Rigney<BR>
     <B>Patrick Rigney<BR>
     </B><I>Director</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    /s/ David Phelan<BR>
     <B>David Phelan<BR>
     </B><I>Director</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date&nbsp;June&nbsp;3, 2004
</DIV>

<P align="center" style="font-size: 11pt;">F-73
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 7pt;">
<B>THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='407'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">BALANCE SHEET</FONT>" -->

<DIV align="center" style="font-size: 7pt;">
<B>BALANCE SHEET</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<B>At 31&nbsp;December 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Note</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Fixed assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>15,805</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,680</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Current assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bank</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>33,592</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stocks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>72,192</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debtors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>173,760</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>218,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>279,544</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>262,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Creditors: </B>amounts falling due within one year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(635,725</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(500,322</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net current Liabilities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(356,181</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(237,900</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total assets less current liabilities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(340,376</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(216,220</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Creditors: </B>amounts falling due after one year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(368,593</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(329,405</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(708,969</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545,625</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Financed by:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Capital and reserves</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Called up share capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Profit and loss account</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(708,971</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545,627</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(708,969</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545,625</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes from an integral part of this balance
sheet.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On behalf of the board:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 48pt; ">

<TR style="font-size: 1pt;">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ Patrick Rigney<BR>
    <B>Patrick Rigney<BR>
     </B><I>Director</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    /s/ David Phelan<BR>
    <B>David Phelan<BR>
     </B><I>Director</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date&nbsp;June&nbsp;3, 2004
</DIV>

<P align="center" style="font-size: 11pt;">F-74
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='408'></A>
</DIV>

<!-- link1 "<FONT style="font-size: 11pt">Notes on and forming part of the Financial Statements</FONT>" -->

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31&nbsp;December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;1&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>TURNOVER</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Turnover is derived entirely from the sale of alcoholic spirits
    in Great Britain.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;2&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>INTEREST PAYABLE AND SIMILAR CHARGES</U></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
    and bank charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>4,658</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,739</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;3&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>STATUTORY AND OTHER INFORMATION</U></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Auditors&#146;
    remuneration, including expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>4,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;4&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>STAFF NUMBERS AND COSTS</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    The average number of persons employed by the company during the
    year, analysed by category, was as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>No.</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling
    and distribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    The aggregate payroll costs of these persons were as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Salaries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>56,280</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,842</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;5&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>TAX ON LOSS ON ORDINARY ACTIVITIES</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    There is no provision for Corporation Tax due to trading losses
    incurred.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;6&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>TANGIBLE FIXED ASSETS</U></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 12pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Motor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 12pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Vehicles</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 12pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Cost</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additions
    in year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>At
    end of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>23,500</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>23,500</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-75

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31&nbsp;December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 11pt;">
<B>NOTE&nbsp;6&nbsp;-&nbsp;<U>TANGIBLE FIXED ASSETS
(CONT&#146;D)</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 12pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Motor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 12pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Vehicles</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 12pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Depreciation</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,820</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Charge
    for year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,875</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>At
    end of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>7,695</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>7,695</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Net
    book value</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    31&nbsp;December 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>15,805</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>15,805</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    31&nbsp;December 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,680</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Included in the net book value of tangible fixed assets are
    motor vehicles held under finance leases amounting to
    &#163;15,805. The depreciation charge in respect of these leased
    assets amounts to &#163;5,875. This depreciation charge is
    charged to the profit and loss account of Castle Brands Spirits
    Company Limited as the vehicle is solely used by one of their
    employees, however the vehicle was financed leased by The
    Roaring Water Bay Spirits Company (GB)&nbsp;Limited.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;7&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>STOCKS</U></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finished
    goods</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>72,192</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,715</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    There are no material differences between the replacement cost
    of stock and the balance sheet amounts.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;8&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>DEBTORS</U></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
    debtors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>171,677</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214,124</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepayments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,083</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,583</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>173,760</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>218,707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-76

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31&nbsp;December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;9&nbsp;-&nbsp;<U>CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
    creditors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>30,353</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,016</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PAYE/PRSI</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>10,521</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,605</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accruals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>&nbsp;&#150;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VAT</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3,778</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,671</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts
    owed to related undertaking</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>516,038</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>425,312</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank
    loans and overdraft</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>14,777</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,377</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Memorandum
    discounting facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>57,072</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts
    due under finance lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3,186</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,895</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>635,725</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500,322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;10&nbsp;-&nbsp;<U>CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amount
    owed to related undertaking</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>357,965</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>309,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts
    due under finance lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>10,628</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,605</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>368,593</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>329,405</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;11&nbsp;-&nbsp;<U>CALLED UP SHARE CAPITAL</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Authorised</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100
    Ordinary shares of &#163;1 each</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>100</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Alloted,
    called up and fully paid</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2
    Ordinary shares of &#163;1 each</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;12&nbsp;-&nbsp;<U>RESERVES</U></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Profit and</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loss Account</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    1&nbsp;January 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545,627</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss
    for the financial year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(163,344</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    31&nbsp;December 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(708,971</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-77

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31&nbsp;December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;13&nbsp;-&nbsp;</B></TD>
    <TD>
    <B><U>RECONCILIATION OF MOVEMENT IN SHAREHOLDERS&#146;
    DEFICIT</U></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146;
    deficit at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(545,625</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(476,730</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss
    for the financial year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(163,344</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68,895</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; deficit at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(708,969</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545,625</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;14&nbsp;-&nbsp;<U>COMMITMENTS</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I>Capital Commitments</I></B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    There were no capital commitments of a significant nature
    authorized at the balance sheet date.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;15&nbsp;-&nbsp;<U>SECURITY</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    David Phelan and Patrick Rigney have granted a joint and several
    letter of guarantee in the amount of&nbsp;&#163;40,000 each, in
    favour of Ulster Bank Limited.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Ulster Bank Limited also holds an all monies General Counter
    Indemnity dated&nbsp;29 January 2001 together with supporting
    resolution in respect of the C&nbsp;&#38;&nbsp;D Guarantee in
    the amount of&nbsp;&#163;40,000.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;16&nbsp;-&nbsp;<U>RELATED PARTY TRANSACTIONS</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    The following entities are considered to be related parties for
    the purposes of Financial Reporting Standard No.&nbsp;8&nbsp;-
    &#147;Related Party Disclosures&#148;:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap>Entity</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Relationship</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Castle Brands Inc. (a Delaware Corporation)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Ultimate parent undertaking</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Castle Brands Spirits Marketing and Sales Company Limited (Irish
    registered undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Immediate parent undertaking</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Roaring Water Bay Spirits Company (NI)&nbsp;Limited (NI
    registered undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Castle Brands Spirits Group Limited (Irish registered
    undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Castle Brands Spirits Company Limited (Irish
    registeredundertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Boru Vodka Company Limited (Irish registered undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Clontarf Irish Whiskey Company (Irish registered undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Castle Brands Whiskey Company Limited (Irish registered
    undertaking)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Great Spirits Company LLC (a Delaware limited liability company)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Under common control</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-78

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
</DIV>

<DIV align="center" style="font-size: 12pt;">
Notes on and forming part of the Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 4.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the Year Ended 31&nbsp;December 2003
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>NOTE&nbsp;16&nbsp;-&nbsp;</B></TD>
    <TD align="left">
    <B><U>RELATED PARTY TRANSACTIONS (CONT&#146;D)</U></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Details of transactions with related parties during the year are
    follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap>&nbsp;Entity</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Transaction</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Payable/(receivable)</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Spirits Company Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    Purchases</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>255,391</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Disclosed in note&nbsp;9 as amounts due within one year to
    related undertakings at the balance sheet date are the following
    amounts:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Inc.,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>516,038</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Spirits Company Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>425,312</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>516,038</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>425,312</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Disclosed in note&nbsp;10 as amounts due after one year to
    related undertakings at the balance sheet date are the following
    amounts:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>2002</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#163;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>&#163;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Castle
    Brands Spirits Marketing and Sales Company Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>357,965</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>309,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;17&nbsp;-&nbsp;<U>CASH FLOW STATEMENT</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    The company has relied on specified exemptions contained in
    Financial Reporting Standard No.&nbsp;l on the grounds that the
    company is entitled to the benefit of those exemptions as a
    small company.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;18&nbsp;-&nbsp;<U>COMPARATIVES</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Comparatives have been regrouped where necessary, on a basis
    consistent with the current year.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTE&nbsp;19&nbsp;-&nbsp;<U>APPROVAL OF FINANCIAL
STATEMENTS</U></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    The financial statements were approved by the board on
    June&nbsp;3 2004.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">F-79
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
Castle Brands Inc.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have examined Castle Brands Spirits Company Limited&#146;s
(formerly known as The Roaring Water Bay Spirits Company
Limited) schedule reconciling their financial statements
prepared in accordance with the Companies Acts, 1963 to 2003 and
all regulations to U.S. generally accepted accounting principles
of as and for the years ended December&nbsp;31, 2003 and 2002
and The Roaring Water Bay Spirits Company (GB) Limited&#146;s
schedule reconciling their financial statements prepared in
accordance with the Companies Acts, 1985 and all regulations to
U.S. generally accepted accounting principles of as and for the
years ended December&nbsp;31, 2003. Each Company&#146;s
management is responsible for their schedules of reconciliation.
Our responsibility is to express an opinion based on our
examinations.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our examinations were conducted in accordance with the standards
of the Public Company Accounting Oversight Board (United States)
and, accordingly, included examining on a test basis, evidence
supporting the Companies&#146; reconciliations and performing
such other procedures as we considered necessary in the
circumstances. We believe that our examinations provide a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our examination disclosed that The Roaring Water Bay Spirits
Company (GB) Limited&#146;s financial statements omitted a
statement of cash flows which is required to be presented.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, except for the omission of a statement of cash
flows described in the preceding paragraph, the schedules
referred to above present, in all material respects, the
reconciling differences between net income (loss) and
shareholders&#146; equity amounts reported in the historical
financial statements and the corresponding amounts that would be
reported if those financial statements were presented directly
in U.S. generally accepted accounting principles.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 60pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/ Eisner LLP
</DIV>

<DIV align="left" style="font-size: 11pt;">
Eisner LLP
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
New York, NY
</DIV>

<DIV align="left" style="font-size: 11pt;">
September&nbsp;21, 2005
</DIV>

<P align="center" style="font-size: 11pt;">F-80
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The financial statements of the Castle Brands Spirits Company
Limited (formerly known as the Roaring Water Bay Spirits Company
Ltd.) are prepared in accordance with generally accepted
accounting principles in Ireland (&#147;Irish GAAP&#148;)
conform to those generally accepted in the United States
(&#147;U.S. GAAP&#148;), in all material respects, except as
noted below:
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Reconciliation of Income/(Losses) reported to U.S.
GAAP:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss)/income as reported in accordance with Irish GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(54,056</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,393</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred expenditures&nbsp;&#151; R&#38;D</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,210</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>( 24,347</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization&nbsp;&#151; deferred expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,343</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss)/income under U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,030</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>116,389</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted net loss per share under U.S. GAAP:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Deferred expenditures&nbsp;&#151; R&#38;D</B>&nbsp;&#151;
Under Irish&nbsp;GAAP, research and development costs are
capitalized and amortized over five years. Under U.S. GAAP,
research and development costs are expensed as incurred.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Push down accounting&nbsp;&#151; </B> The statutory financial
statements of the Castle Brands Spirits Company Limited
(formerly known as the Roaring Water Bay Spirits Company Ltd.)
are stated at historical cost. The adjustments to U.S.&nbsp;GAAP
include the &#147;push down&#148; of the fair value of all
assets acquired in the acquisition by Castle Brands, Inc., as of
December&nbsp;1, 2003, of $17,421,051.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Reconciliation of total assets, liabilities, and
shareholder equity to U.S. GAAP:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets under Irish GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,878,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,176,480</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,285,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(147,335</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets under U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,164,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,029,145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities under Irish GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,992,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,388,169</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities under U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,992,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,388,169</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders equity under Irish GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>885,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>788,311</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,285,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(147,335</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders equity under U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,171,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>640,976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders equity under U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,164,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,029,145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">F-81

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Reconciliation of statements of cash flow to U.S.
GAAP:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from operating activities under Irish GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss/income as reported in accordance with U.K. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>( 54,056</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67,393</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred expenditures&nbsp;&#151; R&#38;D</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>( 64,210</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>( 24,347</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization&nbsp;&#151; deferred expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,343</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss)/income under U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,030</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>116,389</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net (loss)/income to net cash used in
    operating activities<BR>
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(102,236</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73,343</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities under
    U.S.&nbsp;GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>( 102,236</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>( 73,343</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities under Irish&nbsp;GAAP
    Deferred expenditures&nbsp;&#151; R&#38;D</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in operating activities under U.S. GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The functional currency used on these financial statements is
not a highly inflationary currency.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The exchange rates used at December,&nbsp;31st 2003 and
December, 31st 2002, were 1.2557 and 1.0483, respectively. The
weighted average exchange rates at December, 31st 2003 and
December, 31st 2002 were 1.1529 and 0.9459, respectively.
</DIV>

<P align="center" style="font-size: 11pt;">F-82

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The financial statements of the Roaring Water Bay Spirits
Company (GB)&nbsp;Ltd. are prepared in accordance with generally
accepted accounting principles in the United Kingdom
(&#147;UK&nbsp;GAAP&#148;) and conform to those generally
accepted in the United States (&#147;U.S.&nbsp;GAAP&#148;), in
all material respects.
</DIV>

<P align="center" style="font-size: 11pt;">F-83
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 14pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2,500,000&nbsp;Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y12717y1271700.gif" alt="(LOGO)">
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common Stock</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROSPECTUS</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B> <FONT style="font-size: 14pt">Oppenheimer&nbsp;&#38;
Co.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt;">

</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="20%"></TD>
    <TD width="80%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B> <FONT style="font-size: 14pt">ThinkEquity Partners
    LLC</FONT></B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;">

</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="41%"></TD>
    <TD width="59%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B> <FONT style="font-size: 14pt">Ladenburg Thalmann&nbsp;&#38;
    Co. Inc.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Through and
including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 (25&nbsp;days after the date of this prospectus), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers&#146; obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotment or subscriptions.</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B>Other Expenses of Issuance and Distribution</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the expenses payable in
connection with the offering described in the Registration
Statement. All such expenses are estimates except for the SEC
registration fee, the NASD filing fee and the American Stock
Exchange filing fee. These expenses will be borne by the
Registrant.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SEC registration fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,722.26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD filing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,662.50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AMEX filing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,000.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer agent and registrar fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accountants&#146; fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing and engraving expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 38%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B>Indemnification of Directors and Officers</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;145 of the Delaware General Corporation Law, or
DGCL, permits, in general, a Delaware corporation to indemnify
any person who was or is a party to any proceeding (other than
an action by, or in the right of, the corporation) by reason of
the fact that he or she is or was a director or officer of the
corporation, or served another entity in any capacity at the
request of the corporation, against liability incurred in
connection with such proceeding, including the estimated
expenses of litigating the proceeding to conclusion and the
expenses actually and reasonably incurred in connection with the
defense or settlement of such proceeding, including any appeal
thereof, if such person acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best
interests of the corporation and, in criminal actions or
proceedings, additionally had no reasonable cause to believe
that his or her conduct was unlawful. Section&nbsp;145(e) of the
DGCL permits the corporation to pay such costs or expenses in
advance of a final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of the director or
officer to repay such amount if he or she is ultimately found
not to be entitled to indemnification under the DGCL.
Section&nbsp;145(f) of the DGCL provides that the
indemnification and advancement of expense provisions contained
in the DGCL shall not be deemed exclusive of any rights to which
a director or officer seeking indemnification or advancement of
expenses may be entitled.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation and bylaws provide, in general,
that we shall indemnify, to the fullest extent permitted by law,
any and all persons whom we shall have the power to indemnify
under those provisions from and against any and all of the
expenses, liabilities, or other matters referred to in or
covered by those provisions. Our certificate of incorporation
and bylaws also provide that the indemnification provided for
therein shall not be deemed exclusive of any other rights to
which those indemnified may be entitled as a matter of law or
which they may be lawfully granted.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with this offering, we are entering into
indemnification agreements with each of our current directors
and officers to give these directors and officers additional
contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation
and bylaws and to provide additional procedural protections. We
expect to enter into a similar agreement with any new directors
or executive officers. We expect to increase our directors&#146;
and officers&#146; liability insurance to $10.0&nbsp;million of
coverage.
</DIV>

<P align="center" style="font-size: 11pt;">II-1

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Underwriting Agreement to be filed as Exhibit&nbsp;1 to this
registration statement will provide for indemnification by us
and the underwriters for certain civil liabilities.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B>Recent Sales of Unregistered Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the three years preceding the filing of this registration
statement, we sold the following securities which were not
registered under the Securities Act of 1933, as amended:
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From December&nbsp;3, 1999 through September&nbsp;11, 2002,
Great Spirits Company LLC, the predecessor of our company,
issued 400,000&nbsp;shares representing limited liability
company membership interests at various prices up to
$30.00&nbsp;per share to 40 accredited investors, as defined in
Rule&nbsp;501 promulgated under the Securities Act of 1933, for
an aggregate offering price of $11.2&nbsp;million. These
membership interests were issued in reliance upon
Section&nbsp;4(2) of the Securities Act of 1933 as a transaction
by an issuer not involving a public offering. 40,000 of these
shares representing membership interests were converted to
40,000 of our Series&nbsp;B convertible preferred shares on
February&nbsp;20, 2003 in reliance on Section&nbsp;4(2) of the
Securities Act of 1933. No commissions or underwriting expenses
were paid in connection with this transaction.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From February&nbsp;20, 2003 through July&nbsp;31, 2003, Great
Spirits Company LLC sold 107,143 shares of Series&nbsp;A
convertible preferred shares at a purchase price of
$7.00&nbsp;per share for an aggregate of $3.8&nbsp;million to a
total of 36 accredited investors. We issued these Series&nbsp;A
convertible preferred shares in reliance upon Section&nbsp;4(2)
of the Securities Act of 1933 as a transaction by an issuer not
involving a public offering. No commissions or underwriting
expenses were paid in connection with this transaction.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;23, 2003, Great Spirits Company LLC entered into
a Revolving Loan Agreement with Keltic Financial Partners, LP,
an institutional investor, providing for a $1.5&nbsp;million
financing secured by receivables, inventory and related items.
In connection with the financing, Great Spirits Company LLC
issued a warrant to the lender, an accredited investor, to
purchase up to 100,000&nbsp;shares of limited liability company
membership interest at $6.00 a share. The note and warrant were
issued in reliance upon Section&nbsp;4(2) of the Securities Act
of 1933 as a transaction by an issuer not involving a public
offering. No commissions or underwriting expenses were paid in
connection with this transaction.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;1, 2003, Great Spirits Company LLC issued
2,068,750 Series&nbsp;C convertible preferred shares at
$8.00&nbsp;per share to 65 accredited investors or
non-U.S.&nbsp;residents for an aggregate purchase price of
$16.6&nbsp;million in connection with the acquisition of Roaring
Water Bay Spirits Group companies and the merger of Great
Spirits Company LLC with our company. In connection with such
merger and acquisition our company issued five shares of common
stock or Series&nbsp;A or B convertible preferred stock, as
applicable, to members of Great Spirits Company LLC for each
like share of membership interest. On February&nbsp;9, 2004,
Watch Hill Advisors LLC, a registered broker-dealer, received a
placement fee of $1.1&nbsp;million and a warrant to
purchase&nbsp;107,118&nbsp;shares of our common stock at $8.00 a
share as placement agent for such transaction. We issued these
shares and the Series&nbsp;C convertible preferred stock in
reliance upon Section&nbsp;4(2) of the Securities Act of 1933 as
a transaction by an issuer not involving a public offering.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the acquisition of the Roaring Water Bay
Spirits Group companies, on December&nbsp;1, 2003, we sold an
aggregate principal amount of
<FONT face="times new roman,times">&#128;</FONT>1,374,750 of our
5% euro denominated convertible subordinated notes due
December&nbsp;1, 2006. On the same day, our wholly owned
subsidiary Castle Brands Spirits Group Limited sold an aggregate
principal amount
of&nbsp;<FONT face="times new roman,times">&#128;</FONT>444,389
of its subordinated notes due December&nbsp;1, 2006, to four
non-U.S.&nbsp;residents and former owners of the Roaring Water
Bay Spirits Group companies. In connection with that closing we
also sold a 5%&nbsp;subordinated note due July&nbsp;11, 2007, in
the principal amount
of&nbsp;<FONT face="times new roman,times">&#128;</FONT>255,000
to FBD International Financial Services, a
non-U.S.&nbsp;resident in connection with the acquisition of
minority interest shares in Castle Brands Spirits Group Limited.
These notes were issued in reliance upon Section&nbsp;4(2) of
the Securities Act of 1933 as a transaction by an issuer not
involving a public offering. No commissions or underwriting
expenses were paid in connection with this transaction.
</DIV>

<P align="center" style="font-size: 11pt;">II-2

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;9, 2004, our wholly owned subsidiary Castle Brands
(USA)&nbsp;Corp. issued an aggregate principal amount of
$4.6&nbsp;million of its 8%&nbsp;senior secured notes which are
guaranteed as to payment by our company. These notes were
accompanied by warrants to purchase&nbsp;25&nbsp;shares of our
common stock at $8.00 a share for every $1,000 principal amount
of such notes for an aggregate of 116,500&nbsp;shares, to 27
accredited investors or non-U.S.&nbsp;residents. The notes and
warrants were issued in reliance upon Section&nbsp;4(2) of the
Securities Act of 1933 as a transaction by an issuer not
involving a public offering. No commissions or underwriting
expenses were paid in connection with this transaction.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From March through August, 2005, we issued $15.0&nbsp;million
aggregate principal amount of our 6%&nbsp;convertible
subordinated promissory notes to two institutional investors,
each an accredited investor. The notes are convertible into one
share of our common stock for each $7.00 in principal with
respect to 40% of the principal amount and $8.00 for the
remainder. We issued the notes in reliance upon
Section&nbsp;4(2) of the Securities Act of 1933 as a transaction
by an issuer not involving a public offering. No commissions or
underwriting expenses were paid in connection with this
transaction.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From November&nbsp;30, 2004 through August&nbsp;2, 2005, we sold
an aggregate of 1,300,000&nbsp;shares of our Series&nbsp;C
convertible preferred stock to 116 accredited investors or
non-U.S.&nbsp;residents at $8.00 a share for an aggregate
purchase price of $10.4&nbsp;million. Ladenburg
Thalmann&nbsp;&#38; Co. Inc., a registered broker-dealer, acted
as the placement agent and Potomac Capital Markets, LLC, a
registered broker-dealer, acted as sub-placement agent, and
together they received aggregate placement fees of $421,330 and
we issued warrants to them and/or their designees to purchase an
aggregate of 65,000&nbsp;shares of our common stock at
$8.00&nbsp;per share. We issued these shares to the investors
and the placement agent warrants to Ladenburg
Thalmann&nbsp;&#38; Co. and its designees and Potomac Capital
Markets in reliance upon Section&nbsp;4(2) of the Securities Act
of 1933 as a transaction by an issuer not involving a public
offering and Section&nbsp;901 of the Securities Act of 1933 as
an offshore transaction to a non-U.S.&nbsp;person.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;1, 2005, we issued a warrant to
purchase&nbsp;20,000&nbsp;shares of our common stock at
$8.00&nbsp;per share to Charles Shuler, and on August&nbsp;23,
2005 we issued a warrant to purchase 100,000&nbsp;shares of our
common stock at $8.00&nbsp;per share to Fieldstone Partners
Inc., each an accredited investor, in return for consulting
services. These warrants were issued in reliance upon
Section&nbsp;4(2) of the Securities Act of 1933 as a transaction
by an issuer not involving a public offering. No commissions or
underwriting expenses were paid in connection with this
transaction.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our purchase of a 60% interest in our
strategic export venture with Gosling&#146;s and that
venture&#146;s procurement of an exclusive global (except
Bermuda) export agreement with Gosling&#146;s Export (Bermuda)
Limited, we issued warrants to certain members and/or employees
of the Gosling family as of April&nbsp;1, 2005 for the purchase
of 90,000&nbsp;shares of our common stock at $8.00&nbsp;per
share. We issued this warrant in reliance upon Section&nbsp;4(2)
of the Securities Act of 1933, as a transaction by an issuer not
involving a public offering. No commissions or underwriting
expenses were paid in connection with the transaction.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Between August&nbsp;8, 2003 and September 27, 2005, we granted
options to purchase shares of our common stock to our employees
and directors under our stock incentive plan at exercise prices
ranging from $6.00 to $8.00. Of the options granted under the
stock incentive plan as of September 27, 2005, options to
purchase an aggregate of 878,500&nbsp;shares of common stock
remain outstanding and options to purchase 104,000&nbsp;shares
have been cancelled and returned to the option plan. None of
these options have been exercised. We issued these options in
reliance on Rule&nbsp;701 promulgated under the Securities Act
of 1933 in that the securities were offered and sold either
pursuant to a written compensatory benefit plan or pursuant to a
written contract relating to compensation.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, each of the share or warrant certificates and each
of the notes issued in the transactions listed above bears a
restrictive legend permitting the transfer thereof only in
compliance with applicable securities laws. The recipients of
securities in each of these transactions listed above
represented to us their intention to acquire the securities for
investment only and not with view to or for sale in connection
with any distribution thereof. All recipients had adequate
access, through their relationship with us or through other
access to information provided by us, to information about our
company.
</DIV>

<P align="center" style="font-size: 11pt;">II-3
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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B>Exhibits and Financial Statement Schedules</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="9%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(a)</TD>
    <TD align="left">
    Exhibits</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp; 1*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement of Merger and Acquisitions, dated as of July&nbsp;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</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment to Agreement of Merger and Acquisitions, dated as of
    October&nbsp;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</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Certificate of Incorporation of the
    Registrant</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Bylaws of the Registrant</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Common Stock Certificate</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Shareholders Agreement, dated as of December&nbsp;1, 2003, by
    and among GSRWB, Inc. and the holders of shares of Series&nbsp;A
    Preferred Stock, Series&nbsp;B Preferred Stock and Series&nbsp;C
    Preferred Stock and the Common Stockholders</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Patterson Belknap Webb&nbsp;&#38; Tyler LLP</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Export Agreement, dated as of February&nbsp;14, 2005 between
    Gosling Partners Inc. and Gosling&#146;s Export (Bermuda) Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 to Export Agreement, dated as of
    February&nbsp;18, 2005, by and among Gosling-Castle Partners
    Inc. and Gosling&#146;s Export (Bermuda) Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    National Distribution Agreement, dated as of September&nbsp;3,
    2004, by and between Castle Brands (USA) Corp. and
    Gosling&#146;s Export (Bermuda) Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subscription Agreement, dated as of February&nbsp;18, 2005, by
    and between Castle Brands Inc. and Gosling-Castle Partners Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stockholders Agreement, dated February&nbsp;18, 2005, by and
    among Gosling-Castle Partners Inc. and the persons listed on
    Schedule I thereto.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Promissory Note, dated February&nbsp;18, 2005, issued by Castle
    Brands Inc. in favor of Gosling-Castle Partners Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement, dated as of August&nbsp;27, 2004, between I.L.A.R.
    S.p.A. and Castle Brands (USA) Corp.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supply Agreement, dated as of January&nbsp;1, 2005, between
    Irish Distillers Limited and Castle Brands Spirits Group Limited
    and Castle Brands (USA) Corp.</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">II-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 to Supply Agreement, dated as of
    September&nbsp;20, 2005, to the Supply Agreement, dated as of
    January&nbsp;1, 2005, among Irish Distillers Limited and Castle
    Brands Spirits Group Limited and Castle Brands (USA) Corp.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Worldwide Distribution Agreement, dated as
    of April&nbsp;16, 2001, by and between Great Spirits Company LLC
    and Gaelic Heritage Corporation Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bottling and Services Agreement, dated as of September&nbsp;1,
    2002, by and between Terra Limited and The Roaring Water Bay
    Spirits Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment to Bottling and Services Agreement, dated as of
    March&nbsp;1, 2005, by and between Terra Limited and Castle
    Brands Spirit Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Convertible Note Purchase Agreement, dated
    as of August&nbsp;16, 2005, by and between Castle Brands Inc.,
    Mellon HBV SPV LLC and Black River Global Credit Fund Ltd.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Convertible Promissory Note, dated
    March&nbsp;1, 2005, issued by Castle Brands Inc. in favor of
    Mellon HBV SPV LLC.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Convertible Promissory Note, dated
    June&nbsp;27, 2005, issued by Castle Brands Inc. in favor of
    Mellon HBV SPV LLC.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Convertible Promissory Note, dated August&nbsp;16, 2005, issued
    by Castle Brands Inc. in favor of Black River Global Credit Fund
    Ltd.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    License Agreement, dated December&nbsp;1, 2003, between The
    Roaring Water Bay (Research and Development) Company Limited and
    GSRWB, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Employment Agreement, effective as of
    May&nbsp;4, 2005, by and between Castle Brands Inc. and Mark
    Andrews</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Employment Agreement, effective as of
    July&nbsp;19, 2005, by and between Castle Brands Inc. and T.
    Kelley Spillane</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated as of May&nbsp;2, 2005 by and
    between Castle Brands Inc. and Keith A. Bellinger</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Summary of employment agreement with Matthew&nbsp;F. MacFarlane</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Non-Competition Deed, dated December&nbsp;1, 2003, between
    GSRWB, Inc. and David Phelan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement, dated August&nbsp;4, 2005, between Castle
    Brands Inc. and David Phelan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement, dated February&nbsp;15, 2005, between Castle
    Brands Inc. and Patrick Rigney</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Consulting Agreement, dated August&nbsp;4, 2005, between
    Castle Brands Inc. and David Phelan</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">II-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Consulting Agreement, dated August&nbsp;2, 2005, between
    Castle Brands Inc. and Patrick Rigney</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supply Agreement, dated January&nbsp;19, 1998, by and between
    Carbery Milk Products Limited and The Roaring Water Bay Spirits
    Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.28**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment and Consent, dated March&nbsp;1, 2003, to Supply
    Agreement, dated January&nbsp;19, 1998, by and between Carbery
    Milk Products Limited and Castle Brands Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Castle Brands Inc. 2003 Stock Incentive Plan, as amended</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment to Castle Brands Inc. 2003 Stock Incentive Plan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.31</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement, dated as of December&nbsp;1, 2004, between
    MHW, Ltd. and Castle Brands (USA) Corp.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.32</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Sublease, dated as of June&nbsp;24, 2004, by and between
    Silvercrest Asset Management Group, LLC, as successor in
    interest to James&nbsp;C. Edwards&nbsp;&#38; Co., Inc. and
    Castle Brands (USA) Corp.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.33</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture of Sublease, dated June 2004, by and between Jennifer
    Dunne and Castle Brand Spirits Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.34</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Office Lease, dated as of February&nbsp;24, 2000, by and between
    Great Spirits Company LLC and Crescent HC Investors L.P.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Office Lease, dated March&nbsp;14, 2001</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.36</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Office Lease, dated January&nbsp;30, 2002</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.37</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to Office Lease, dated March&nbsp;28, 2003</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amendment to Office Lease, dated March&nbsp;23, 2004</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.39</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fifth Amendment to Office Lease, dated June&nbsp;21, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Supplemental Trust Indenture, dated as of August&nbsp;15,
    2005, by and between Castle Brands (USA) Corp. and JPMorgan
    Chase Bank, as trustee and MHW Ltd., as collateral agent</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.41</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amended and Restated Trust Indenture, dated as of
    August&nbsp;15, 2005, by and between Castle Brands (USA) Corp.,
    JPMorgan Chase Bank, as trustee and MHW Ltd., as collateral agent</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.42</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    9% Secured Note dated August&nbsp;15, 2005 issued by Castle
    Brand (USA) Corp. in favor of JPMorgan Chase Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.43</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    General Security Agreement, dated as of June&nbsp;1, 2004, by
    and between Castle Brands (USA) Corp. and JPMorgan Chase Bank,
    as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.44</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to General Security Agreement, dated as of
    August&nbsp;15, 2005, by and between Castle Brands (USA) Corp.
    and JPMorgan Chase Bank, as trustee</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">II-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.45</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Guaranty of Payment and Performance, dated June&nbsp;1, 2004,
    from Castle Brands Inc. to JPMorgan Chase Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.46</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Guarantee of Payment and Performance, dated
    as of August&nbsp;15, 2005, by and between Castle Brands Inc. to
    JPMorgan Chase Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.47</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Collateral Agreement, dated as of June&nbsp;1, 2004, by and
    among MHW Ltd., Castle Brands (USA) Corp. and JPMorgan Chase
    Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.48</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Collateral Agreement, dated as of
    August&nbsp;15, 2005, by and among MHW Ltd., Castle Brands (USA)
    Corp. and JPMorgan Chase Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.49</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Credit Facility Agreement, dated as of December&nbsp;16, 2004,
    by and among Ulster Bank Ireland Limited, Ulster Bank Ltd. and
    Castle Brands Spirits Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.50</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Accounts Receivable Credit Facility Agreement, dated as of
    April&nbsp;4, 2005, by and among Ulster Bank Ireland Limited,
    Ulster Bank Ltd. and Castle Brands Spirits Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.51</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract, dated as of April&nbsp;1, 2005, by and between Castle
    Brands Inc. and BPW LLC</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>16</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter from Grodsky Caporrino&nbsp;&#38; Kaufman, PC</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of Subsidiaries of the Registrant</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Eisner LLP, Independent Registered Public Accounting
    Firm</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of BDO Simpson Xavier, Independent Registered Public
    Accounting Firm (The Castle Brands Spirits Company Limited
    (formerly known as The Roaring Water Bay Spirits Company
    Limited))</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of BDO Simpson Xavier, Independent Registered Public
    Accounting Firm (The Roaring Water Bay Spirits Company (GB)
    Limited)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Patterson Belknap Webb&nbsp;&#38; Tyler LLP (included
    in exhibit&nbsp;5.1)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included on the Signature Page of the
    Registration Statement)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>**&nbsp;</TD>
    <TD align="left">
    Confidential treatment requested for certain portions of this
    exhibit pursuant to Rule&nbsp;406 under the Securities Exchange
    Act of 1934, as amended, which portions are omitted and filed
    separately with the Securities and Exchange Commission.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 11pt;">II-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial
Statement Schedules
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Valuation and Qualifying Accounts (in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Charged to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>cost and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at end</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>beginning of period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation reserve deducted in the balance sheet from the asset
    to which it applies (in thousands):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    6/30/05 Allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005 Allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004 Allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003 Allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="17">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    6/30/05 Allowance for excess and obsolescence</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005 Allowance for excess and obsolescence</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004 Allowance for excess and obsolescence</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003 Allowance for excess and obsolescence</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred Taxes:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    6/30/05 Valuation reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,918</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005 Valuation reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,180</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004 Valuation reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,471</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003 Valuation reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">II-8
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B>Undertakings</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned registrant hereby undertakes to provide to the
underwriter, at the closing specified in the underwriting
agreement, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt
delivery to each purchaser.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers,
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned registrant hereby undertakes that:
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule&nbsp;430A and contained in a form of prospectus filed by
the registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
</DIV>

<P align="center" style="font-size: 11pt;">II-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the
29th day of September, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="36%"></TD>
    <TD width="64%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    CASTLE BRANDS INC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt;">

<TR>
    <TD width="36%"></TD>
    <TD width="3%"></TD>
    <TD width="61%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ Mark Andrews</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="36%"></TD>
    <TD width="64%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Mark Andrews</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Chairman of the Board, President and</TD>
</TR>

<TR valign="top"  style="font-size: 11pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Chief Executive Officer</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>POWER OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Mark Andrews,
Keith A. Bellinger and Matthew F. MacFarlane, and each or any of
them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign
this Registration Statement, and any and all amendments
(including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and
all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact
and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their substitutes, may lawfully do
or cause to be done by virtue hereof.
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Mark Andrews<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Mark
    Andrews</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman of the Board, President and Chief Executive Officer
    (Principal Executive Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Keith A. Bellinger<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Keith
    A. Bellinger</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President, Chief Operating Officer and Secretary
    (Principal Financial Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Matthew F.
    MacFarlane<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Matthew
    F. MacFarlane</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President and Chief Financial Officer (Principal
    Accounting Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">John F. Beaudette<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>John
    F. Beaudette</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Robert J. Flanagan<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Robert
    J. Flanagan</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">S-1
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Colm Leen<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Colm
    Leen</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Phillip
    Frost,&nbsp;M.D.<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Phillip
    Frost,&nbsp;M.D.&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Richard Morrison<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Richard
    Morrison</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Frederick M.R.
    Smith<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Frederick
    M.R. Smith</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Kevin P. Tighe<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Kevin
    P. Tighe</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;29, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 11pt;">S-2
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 11pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEX</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp; 1*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement of Merger and Acquisitions, dated as of July&nbsp;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</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment to Agreement of Merger and Acquisitions, dated as of
    October&nbsp;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</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Certificate of Incorporation of the
    Registrant</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Bylaws of the Registrant</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Common Stock Certificate</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Shareholders Agreement, dated as of December&nbsp;1, 2003, by
    and among GSRWB, Inc. and the holders of shares of Series&nbsp;A
    Preferred Stock, Series&nbsp;B Preferred Stock and Series&nbsp;C
    Preferred Stock and the Common Stockholders</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Patterson Belknap Webb&nbsp;&#38; Tyler LLP</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Export Agreement, dated as of February&nbsp;14, 2005 between
    Gosling Partners Inc. and Gosling&#146;s Export (Bermuda) Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 to Export Agreement, dated as of
    February&nbsp;18, 2005, by and among Gosling-Castle Partners
    Inc. and Gosling&#146;s Export (Bermuda) Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    National Distribution Agreement, dated as of September&nbsp;3,
    2004, by and between Castle Brands (USA) Corp. and
    Gosling&#146;s Export (Bermuda) Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subscription Agreement, dated as of February&nbsp;18, 2005, by
    and between Castle Brands Inc. and Gosling-Castle Partners Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stockholders Agreement, dated February&nbsp;18, 2005, by and
    among Gosling-Castle Partners Inc. and the persons listed on
    Schedule I thereto.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Promissory Note, dated February&nbsp;18, 2005, issued by Castle
    Brands Inc. in favor of Gosling-Castle Partners Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement, dated as of August&nbsp;27, 2004, between I.L.A.R.
    S.p.A. and Castle Brands (USA) Corp.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supply Agreement, dated as of January&nbsp;1, 2005, between
    Irish Distillers Limited and Castle Brands Spirits Group Limited
    and Castle Brands (USA) Corp.</TD>
</TR>

</TABLE>
</CENTER>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 to Supply Agreement, dated as of
    September&nbsp;20, 2005, to the Supply Agreement, dated as of
    January&nbsp;1, 2005, among Irish Distillers Limited and Castle
    Brands Spirits Group Limited and Castle Brands (USA) Corp.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Worldwide Distribution Agreement, dated as
    of April&nbsp;16, 2001, by and between Great Spirits Company LLC
    and Gaelic Heritage Corporation Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bottling and Services Agreement, dated as of September&nbsp;1,
    2002, by and between Terra Limited and The Roaring Water Bay
    Spirits Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment to Bottling and Services Agreement, dated as of
    March&nbsp;1, 2005, by and between Terra Limited and Castle
    Brands Spirit Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Convertible Note Purchase Agreement, dated
    as of August&nbsp;16, 2005, by and between Castle Brands Inc.,
    Mellon HBV SPV LLC and Black River Global Credit Fund Ltd.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Convertible Promissory Note, dated
    March&nbsp;1, 2005, issued by Castle Brands Inc. in favor of
    Mellon HBV SPV LLC.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Convertible Promissory Note, dated
    June&nbsp;27, 2005, issued by Castle Brands Inc. in favor of
    Mellon HBV SPV LLC.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Convertible Promissory Note, dated August&nbsp;16, 2005, issued
    by Castle Brands Inc. in favor of Black River Global Credit Fund
    Ltd.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    License Agreement, dated December&nbsp;1, 2003, between The
    Roaring Water Bay (Research and Development) Company Limited and
    GSRWB, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Employment Agreement, effective as of
    May&nbsp;4, 2005, by and between Castle Brands Inc. and Mark
    Andrews</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Employment Agreement, effective as of
    July&nbsp;19, 2005, by and between Castle Brands Inc. and T.
    Kelley Spillane</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated as of May&nbsp;2, 2005 by and
    between Castle Brands Inc. and Keith A. Bellinger</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Summary of employment agreement with Matthew&nbsp;F. MacFarlane</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Non-Competition Deed, dated December&nbsp;1, 2003, between
    GSRWB, Inc. and David Phelan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement, dated August&nbsp;4, 2005, between Castle
    Brands Inc. and David Phelan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement, dated February&nbsp;15, 2005, between Castle
    Brands Inc. and Patrick Rigney</TD>
</TR>

</TABLE>
</CENTER>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Consulting Agreement, dated August&nbsp;4, 2005, between
    Castle Brands Inc. and David Phelan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Consulting Agreement, dated August&nbsp;2, 2005, between
    Castle Brands Inc. and Patrick Rigney</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supply Agreement, dated January&nbsp;19, 1998, by and between
    Carbery Milk Products Limited and The Roaring Water Bay Spirits
    Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.28**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment and Consent, dated March&nbsp;1, 2003, to Supply
    Agreement, dated January&nbsp;19, 1998, by and between Carbery
    Milk Products Limited and Castle Brands Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Castle Brands Inc. 2003 Stock Incentive Plan, as amended</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment to Castle Brands Inc. 2003 Stock Incentive Plan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.31</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement, dated as of December&nbsp;1, 2004, between
    MHW, Ltd. and Castle Brands (USA) Corp.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.32</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Sublease, dated as of June&nbsp;24, 2004, by and between
    Silvercrest Asset Management Group, LLC, as successor in
    interest to James&nbsp;C. Edwards&nbsp;&#38; Co., Inc. and
    Castle Brands (USA) Corp.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.33</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture of Sublease, dated June 2004, by and between Jennifer
    Dunne and Castle Brand Spirits Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.34</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Office Lease, dated as of February&nbsp;24, 2000, by and between
    Great Spirits Company LLC and Crescent HC Investors L.P.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Office Lease, dated March&nbsp;14, 2001</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.36</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Office Lease, dated January&nbsp;30, 2002</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.37</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to Office Lease, dated March&nbsp;28, 2003</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amendment to Office Lease, dated March&nbsp;23, 2004</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.39</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fifth Amendment to Office Lease, dated June&nbsp;21, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Supplemental Trust Indenture, dated as of August&nbsp;15,
    2005, by and between Castle Brands (USA) Corp. and JPMorgan
    Chase Bank, as trustee and MHW Ltd., as collateral agent</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.41</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amended and Restated Trust Indenture, dated as of
    August&nbsp;15, 2005, by and between Castle Brands (USA) Corp.,
    JPMorgan Chase Bank, as trustee and MHW Ltd., as collateral agent</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.42</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    9% Secured Note dated August&nbsp;15, 2005 issued by Castle
    Brand (USA) Corp. in favor of JPMorgan Chase Bank, as trustee</TD>
</TR>

</TABLE>
</CENTER>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.43</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    General Security Agreement, dated as of June&nbsp;1, 2004, by
    and between Castle Brands (USA) Corp. and JPMorgan Chase Bank,
    as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.44</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to General Security Agreement, dated as of
    August&nbsp;15, 2005, by and between Castle Brands (USA) Corp.
    and JPMorgan Chase Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.45</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Guaranty of Payment and Performance, dated June&nbsp;1, 2004,
    from Castle Brands Inc. to JPMorgan Chase Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.46</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Guarantee of Payment and Performance, dated
    as of August&nbsp;15, 2005, by and between Castle Brands Inc. to
    JPMorgan Chase Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.47</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Collateral Agreement, dated as of June&nbsp;1, 2004, by and
    among MHW Ltd., Castle Brands (USA) Corp. and JPMorgan Chase
    Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.48</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Collateral Agreement, dated as of
    August&nbsp;15, 2005, by and among MHW Ltd., Castle Brands (USA)
    Corp. and JPMorgan Chase Bank, as trustee</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.49</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Credit Facility Agreement, dated as of December&nbsp;16, 2004,
    by and among Ulster Bank Ireland Limited, Ulster Bank Ltd. and
    Castle Brands Spirits Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.50</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Accounts Receivable Credit Facility Agreement, dated as of
    April&nbsp;4, 2005, by and among Ulster Bank Ireland Limited,
    Ulster Bank Ltd. and Castle Brands Spirits Company Limited</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.51</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract, dated as of April&nbsp;1, 2005, by and between Castle
    Brands Inc. and BPW LLC</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>16</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter from Grodsky Caporrino&nbsp;&#38; Kaufman, PC</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of Subsidiaries of the Registrant</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Eisner LLP, Independent Registered Public Accounting
    Firm</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of BDO Simpson Xavier, Independent Registered Public
    Accounting Firm (The Castle Brands Spirits Company Limited
    (formerly known as The Roaring Water Bay Spirits Company
    Limited))</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of BDO Simpson Xavier, Independent Registered Public
    Accounting Firm (The Roaring Water Bay Spirits Company (GB)
    Limited)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Patterson Belknap Webb&nbsp;&#38; Tyler LLP (included
    in exhibit&nbsp;5.1)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included on the Signature Page of the
    Registration Statement)</TD>
</TR>

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    <TD width="4%"></TD>
    <TD width="96%"></TD>
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    <TD>*</TD>
    <TD align="left">
    To be filed by amendment.</TD>
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    <TD>**&nbsp;</TD>
    <TD align="left">
    Confidential treatment requested for certain portions of this
    exhibit pursuant to Rule&nbsp;406 under the Securities Exchange
    Act of 1934, as amended, which portions are omitted and filed
    separately with the Securities and Exchange Commission.</TD>
</TR>

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{"company-data": {"conformed-name": "Castle Brands Inc", "cik": "0001311538", "irs-number": "000000000"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-128676", "film-number": "051111086"}, "business-address": {"street1": "570 LEXINGTON AVE", "city": "NEW YORK", "state": "NY", "zip": "10022"}, "mail-address": {"street1": "570 LEXINGTON AVE", "city": "NEW YORK", "state": "NY", "zip": "10022"}}
S-1
Table of Contents
As filed with the Securities and Exchange Commission on
September 29, 2005
Registration
No.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Castle Brands Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
2080
41-2103550
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer Identification Number)
570 Lexington Avenue, 29th Floor
New York, NY 10022
(646) 356-0200
(Address, Including Zip Code, and Telephone Number, Including
Area Code,
of Registrant's Principal Executive Offices)
Mark Andrews
Chief Executive Officer
Castle Brands Inc.
570 Lexington Avenue, 29th Floor
New York, NY 10022
(646) 356-0200
(Name, Address Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to:
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
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the effective date of
this registration statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box.
o
Table of Contents
CALCULATION OF REGISTRATION FEE
Proposed Maximum Aggregate
Amount of
Title of Each Class of Securities to Be Registered
Offering Price(1)(2)
Registration Fee
Common Stock, $.01 par value per share
$31,625,000
$3,722.26
(1)
Includes shares of common stock issuable upon exercise of
    underwriters' over-allotment option.
(2)
Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule 457(o) under the Securities Act of
    1933, as amended.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
Table of Contents
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.
SUBJECT TO COMPLETION, DATED SEPTEMBER
29, 2005.
2,500,000 Shares
Common Stock
This is an initial public offering of shares of our common
stock. All of the shares to be sold in the offering are being
sold by us.
Prior to this offering, there has been no public market for our
common stock. It is currently estimated that the initial public
offering price per share will be between
$           and
$           .
We have applied to have our common stock quoted on the American
Stock Exchange under the symbol "ROX."
Investing in our common stock involves risks. See "Risk
Factors" beginning on page 8 to read about factors you
should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
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.
We have granted the underwriters a 30-day option to purchase up
to an additional 375,000 shares of common stock from us at
the initial public offering price less the underwriting
discount, solely to cover over-allotments.
The underwriters expect to deliver the shares to investors in
this offering in New York, New York on or
about                       ,
2005.
Oppenheimer & Co.
ThinkEquity Partners LLC
Ladenburg Thalmann & Co. Inc.
,
2005.
Table of Contents
[Artwork to be filed by amendment]
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
8
Forward-Looking Statements
22
Market Data and Forecasts
22
Use of Proceeds
23
Dividend Policy
24
Capitalization
25
Dilution
27
Selected Consolidated Financial Data
29
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
32
Business
48
Management
66
Certain Relationships and Related Party
    Transactions
80
Security Ownership of Certain Beneficial
    Owners and Management
83
Description of Securities
86
Shares Eligible for Future Sale
91
Underwriting
93
Legal Matters
97
Experts
97
Where You Can Find Additional
    Information
97
Index to Financial Statements
F-1
EX-3.1: FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
EX-3.2: FORM OF AMENDED AND RESTATED BYLAWS
EX-4.2: SHAREHOLDERS AGREEMENT
EX-10.1: EXPORT AGREEMENT
EX-10.2: AMENDMENT NO. 1 TO EXPORT AGREEMENT
EX-10.3: NATIONAL DISTRIBUTION AGREEMENT
EX-10.4: SUBSCRIPTION AGREEMENT
EX-10.5: STOCKHOLDERS AGREEMENT
EX-10.6: PROMISSORY NOTE
EX-10.7: AGREEMENT
EX-10.8: SUPPLY AGREEMENT
EX-10.9: AMENDMENT NO. 1 TO SUPPLY AGREEMENT
EX-10.10: AMENDED AND RESTATED WORLDWIDE DISTRIBUTION AGREEMENT
EX-10.11: BOTTLING AND SERVICES AGREEMENT
EX-10.12: AMENDMENT TO BOTTLING AND SERVICES AGREEMENT
EX-10.13: AMENDED AND RESTATED CONVERTIBLE NOTE PURCHASE AGREEMENT
EX-10.14: AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE
EX-10.15: AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE
EX-10.16: CONVERTIBLE PROMISSORY NOTE
EX-10.17: LICENSE AGREEMENT
EX-10.20: EMPLOYMENT AGREEMENT WITH KEITH A. BELLINGER
EX-10.21: SUMMARY OF EMPLOYMENT AGREEMENT WITH MATTHEW F. MACFARLANE
EX-10.22: NON-COMPETITION DEED
EX-10.23: LETTER AGREEMENT
EX-10.24: LETTER AGREEMENT
EX-10.25: LETTER CONSULTING AGREEMENT
EX-10.26: LETTER CONSULTING AGREEMENT
EX-10.27: SUPPLY AGREEMENT
EX-10.28: AMENDMENT AND CONSENT TO SUPPLY AGREEMENT
EX-10.29: 2003 STOCK INCENTIVE PLAN, AS AMENDED
EX-10.30: AMENDMENT TO CASTLE BRANDS INC. 2003 STOCK INCENTIVE PLAN
EX-10.31: LETTER AGREEMENT
EX-10.32: SUBLEASE
EX-10.33: INDENTURE OF SUBLEASE
EX-10.34: OFFICE LEASE
EX-10.35: FIRST AMENDMENT TO OFFICE LEASE
EX-10.36: SECOND AMENDMENT TO OFFICE LEASE
EX-10.37: THIRD AMENDMENT TO OFFICE LEASE
EX-10.38: FOURTH AMENDMENT TO OFFICE LEASE
EX-10.39: FIFTH AMENDMENT TO OFFICE LEASE
EX-10.40: FIRST SUPPLEMENTAL TRUST INDENTURE
EX-10.41: FIRST AMENDED AND RESTATED TRUST INDENTURE
EX-10.42: 9% SECURED NOTE
EX-10.43: GENERAL SECURITY AGREEMENT
EX-10.44: FIRST AMENDMENT TO GENERAL SECURITY AGREEMENT
EX-10.45: GUARANTY PAYMENT AND PERFORMANCE
EX-10.46: FIRST AMENDMENT TO GUARANTEE OF PAYMENT AND PERFORMACE
EX-10.47: COLLATERAL AGREEMENT
EX-10.48: FIRST AMENDMENT TO COLLATERAL AGREEMENT
EX-10.49: CREDIT FACILITY AGREEMENT
EX-10.50: ACCOUNTS RECEIVABLE CREDIT FACILITY AGREEMENT
EX-10.51: CONTRACT
EX-16.1: LETTER FROM GRODSKY CAPORRINO & KAUFMAN, PC
EX-21.1: LIST OF SUBSIDIARIES OF THE REGISTRANT
EX-23.1: CONSENT OF EISNER LLP
EX-23.2: CONSENT OF BDO SIMPSON XAVIER
EX-23.3: CONSENT OF BDO SIMPSON XAVIER
You should rely only on the information contained in this
prospectus. No dealer, salesperson or other person is authorized
to give information that is not contained in this prospectus.
This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any jurisdiction where the
offer or sale is not permitted. The information contained in
this prospectus is correct only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of these securities.
Trademarks
This prospectus includes the names of our brands, which
constitute trademarks or trade names which are proprietary to
and/or registered in our name or in the name of one of our
subsidiaries or related companies, including, but not limited
to, Castle
Brands
tm
,
Boru®, Crazzberry®, Brady's®, Knappogue
Castle Whiskey®,
Clontarf
tm
,
Sea Wynde®, Celtic Crossing® and British Royal Navy
Imperial
Rum
tm
;
and trademarks with respect to brands for which we have certain
exclusive distribution rights and which are proprietary to
and/or registered in the names of third parties, such as
Pallini®, which is owned by I.L.A.R. S.p.A., and
Gosling's
tm
,
Gosling's
tm
Black Seal®,
Gosling's
tm
Gold Bermuda
Rum
tm
,
Gosling's
tm
Old
Rum
tm
which are owned by Gosling Brothers Limited. This prospectus
also contains other brand names, trade names, trademarks or
service marks of other companies and these brand names, trade
names, trademarks or service marks are the property of those
other companies.
Table of Contents
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus and does not contain all the information that
you should consider before investing in our common stock. You
should read this entire prospectus carefully, including
"Risk Factors" and our consolidated financial
statements and related notes, before making an investment
decision. All references to "we," "us,"
"our," or "our company" refer to Castle
Brands Inc. and, where appropriate, our consolidated direct and
indirect subsidiaries.
Our company
We are an emerging developer and global marketer of premium
branded spirits within four growing categories of the spirits
industry: vodka, rum, Irish whiskey and liqueurs/cordials. Since
our formation in 1998, we have invested over $60 million in
capital to develop our operating platform, acquire and grow our
branded portfolio of distinctive premium spirits and establish
U.S. and international sales and distribution. Our premium
spirits brands include, among others, Boru vodka, Gosling's
rum, Knappogue Castle Whiskey and Pallini Limoncello.
For our fiscal year ended March 31, 2005 and the three
months ended June 30, 2005, we recorded sales of
approximately 170,000 cases and 61,000 cases, respectively,
which are measured based on the industry standard of nine-liter
equivalent cases, and revenues of approximately
$12.6 million and $4.5 million, which represented
increases of 161% and 108% from revenues recorded for the prior
comparable fiscal periods. These increases reflect both organic
growth and growth from additions to our brand portfolio. We
intend to continue our current growth through further market
penetration of our brands, as well as through strategic
relationships and acquisitions of both established and emerging
spirits brands with global growth potential.
We have incurred losses since inception and had an accumulated
loss of $33.2 million as of June 30, 2005. We believe
that we will continue to incur sizeable net losses for the
foreseeable future as we expect to make significant investment
in product development and sales and marketing and to incur
significant administrative expenses as we seek to grow our
current and future brands.
Since December 2003, we have acquired The Roaring Water Bay
Spirits Group Limited and its affiliated companies (adding Boru
vodka, Brady's Irish cream and the Clontarf Irish whiskeys
to our portfolio); entered into an exclusive marketing agreement
with I.L.A.R. S.p.A., a family-owned Italian spirits company
founded in 1875 (adding Pallini Limoncello to our portfolio);
and established a strategic export venture, of which we own 60%,
with the Gosling family in Bermuda (adding the Gosling's
rums to our portfolio). We believe that these recent brand
additions, together with our already existing brands, provide us
with a strong base from which we can grow our business.
Our brands
•
Boru vodka
, our leading brand, was the first, and
    continues to be the largest selling, premium vodka produced in
    Ireland. Boru vodka is an ultra-pure, quadruple distilled and
    specially filtered premium vodka with three flavor extensions
    (citrus, orange and crazzberry).
•
Gosling's rums
, a family of premium rums with
    a 150-year history, for which we are, through our export
    venture, the exclusive marketer outside of Bermuda, including
    the award-winning
Gosling's Black Seal
rum;
    and
Sea Wynde
, a premium rum developed and
    introduced by us in 2001.
•
Knappogue Castle Whiskey
, a vintage-dated premium
    single-malt Irish whiskey;
Knappogue Castle 1951
, one of the oldest and
    rarest commercially available Irish whiskeys; and the
Clontarf Irish whiskeys
, a family of premium Irish
    whiskeys, available in single malt, reserve and classic pure
    grain versions.
Table of Contents
•
Brady's Irish cream
, a premium Irish cream
    liqueur;
Celtic Crossing
, a premium Irish liqueur;
    and, pursuant to an exclusive U.S. marketing arrangement,
Pallini Limoncello
, a premium Italian liqueur.
Our competitive strengths
We believe that our competitive strengths include the following:
•
our portfolio of high quality, premium branded spirits with
    significant potential in the higher growth categories of the
    distilled spirits industry;
•
our extensive and already established U.S. distribution
    network within all 50 states and our growing distribution
    network in Europe and elsewhere;
•
our substantial sales and marketing infrastructure, including an
    experienced sales force of 28 people and focused advertising,
    marketing and promotional programs;
•
our highly qualified and experienced management team with
    successful track records in brand development, the distilled
    spirits industry and mergers and acquisitions;
•
our flexible and efficient supply chain, which enables us to
    operate without owning or investing in distilleries, bottling
    plants or other similar facilities; and
•
our ability to forge strategic relationships with owners of both
    emerging and established spirits brands seeking opportunities to
    expand beyond their home markets.
Our growth strategy
Our objective is to continue building a distinctive portfolio of
global premium spirits brands, with a primary focus on
increasing both our total and individual brand case sales. To
achieve this, we intend to continue:
•
increasing market penetration of our existing spirits
    brands
. We intend to utilize our existing distribution
    relationships and sales expertise to achieve growth and gain
    additional market share within retail stores, bars and
    restaurants, both domestically and internationally; add
    experienced salespeople in selected markets; increase sales to
    national chain accounts; and expand our international
    distribution relationships;
•
building brand awareness through innovative marketing,
    advertising and promotional activities
. We intend to
    continue developing compelling campaigns to establish and
    reinforce the image of our brands through the coordinated
    efforts of our experienced internal marketing personnel and
    leading third-party design and advertising firms; 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.
Our corporate information
We are a Delaware corporation formed in July 2003 by our
predecessor company, Great Spirits Company LLC, which was formed
in 1998. We maintain our principal executive offices at 570
Lexington Avenue, 29th Floor, New York, NY 10022. Our
telephone number is (646) 356-0200. We also have offices in
Dublin, Ireland and Houston, Texas. Our website is located at
www.castlebrandsinc.com. The information contained on our
website or that can be accessed through our website does not
constitute part of this prospectus.
-2-
Table of Contents
The Offering
Common stock offered
2,500,000 shares
Common stock to be outstanding after this offering
10,950,493 shares
Use of proceeds
We estimate that our net proceeds from this offering will be
    approximately
    $            million,
    assuming an initial offering price of
    $            per
    share of common stock, the midpoint of the range set forth on
    the cover page of this prospectus, after deducting the
    underwriting discounts and commissions and estimated offering
    expenses. We intend to use the proceeds from this offering for
    working capital and general corporate purposes and to:
•   increase our sales and marketing
    activities;
•   fulfill our capital commitments to our
    Gosling-Castle Partners Inc. strategic export venture;
•   hire additional employees; and
•   repay a portion of our indebtedness.
Although we have no present commitments or agreements to do so,
    we may also use a portion of the net proceeds of this offering
    to invest in or acquire additional brands through mergers, stock
    or asset purchases, joint ventures, long-term exclusive
    distribution arrangements and/or other strategic relationships.
    See "Use of Proceeds."
Proposed American Stock Exchange symbol
"ROX"
Risk factors
See "Risk Factors" immediately following this
    prospectus summary to read about factors you should consider
    before buying shares of our common stock.
Except where otherwise indicated, the information in this
prospectus assumes that the following events, each of which will
occur upon the consummation of this offering, have already
occurred:
•
the conversion of all of our Series A convertible preferred
    stock into 535,715 shares of our common stock;
•
the conversion of all of our Series B convertible preferred
    stock into 200,000 shares of our common stock;
•
the conversion of all of our Series C convertible preferred
    stock into 3,353,750 shares of our common stock;
•
our issuance of 133,857 shares of common stock in payment of all
    of the dividends accrued on our preferred stock through the
    estimated closing of this offering, including 112,244 shares
    issued in payment of the $752,707 in accrued dividends
    outstanding as of June 30, 2005;
•
the conversion of all
€
1,374,750
    ($1,658,773) principal amount of our 5% euro denominated
    convertible subordinated notes into 263,362 shares of our
    common stock; and
-3-
Table of Contents
•
the conversion of $6.0 million of the $15.0 million
    principal amount of our 6% convertible notes into
    857,143 shares of our common stock.
The number of shares of common stock to be outstanding after
this offering excludes the following:
•
2,000,000 shares of common stock reserved for issuance upon
    the exercise of stock options granted or that may be granted
    under our stock incentive plan, including 878,500 shares of
    common stock reserved for issuance upon the exercise of
    currently outstanding stock options, with a weighted average
    exercise price of $6.83 per share;
•
10,000 shares of common stock reserved for issuance upon
    the exercise of stock options granted outside of our stock
    incentive plan, with an exercise price of $6.00 per share;
•
598,618 shares of common stock reserved for issuance upon
    the exercise of outstanding warrants, with a weighted average
    exercise price of $7.67 per share; and
•
1,125,000 shares of common stock reserved for issuance upon
    the conversion of $9.0 million principal amount of our
    6% convertible notes, with a conversion price of $8.00 per
    share.
Unless otherwise indicated, the information in this prospectus
also assumes that the underwriters do not exercise their
over-allotment option to purchase up to 375,000 additional
shares of common stock from us.
Currency Translation
The functional currency for our foreign operations is the euro
in Ireland and the British pound in the United Kingdom. With
respect to our consolidated financial statements, the
translation from the applicable foreign currencies to
U.S. dollars is performed for balance sheet accounts using
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 other comprehensive income. Gains
or losses resulting from foreign currency transactions are
included in other income/expenses.
Where in this prospectus we refer to amounts in euros or British
pounds, we have for your convenience also in certain cases
provided a translation of those amounts to U.S. dollars in
parenthesis. Where the numbers refer to a specific balance sheet
date account or financial statement period account, we have used
the exchange rate that was used to perform the translations in
connection with the applicable financial statement. In all other
instances, unless otherwise indicated, the translations have
been made using the exchange rates as of June 30, 2005,
each as calculated from the Interbank exchange rates as reported
by Oanda.com. On June 30, 2005, the exchange rate of the
euro dollar in exchange for U.S. dollars and the exchange
rate of the British pound in exchange for U.S. dollars were
€
1.00 =
U.S. $1.2066 (equivalent to U.S. $1.00 =
€
0.8288) for
euros and £1.00 = U.S. $1.8048 (equivalent to
U.S. $1.00 = £0.5541) for British pounds.
These translations should not be construed as representations
that the euro and British pound amounts actually represent
U.S. dollar amounts or could be converted into
U.S. dollars at the rates indicated.
-4-
Table of Contents
Summary Consolidated Financial Information
The following tables set forth summary consolidated financial
data and other data for the periods ended and as of the dates
indicated. The summary financial data for the fiscal years ended
March 31, 2003, 2004 and 2005 have been derived from our
historical audited consolidated financial statements. The
summary consolidated financial data presented as of and for the
three months ended June 30, 2004 and 2005 have been derived
from our unaudited interim consolidated financial statements,
which in the opinion of our management include all adjustments,
consisting of only normal recurring adjustments, that we
considered necessary for a fair presentation of our financial
position and results of operations as of and for such unaudited
periods. The historical results are not necessarily indicative
of results to be expected for future periods, and results for
the three month period ended June 30, 2005 are not
necessarily indicative of results that may be expected for the
entire year ending March 31, 2006. You should read the
following summary financial data and other data in conjunction
with our consolidated financial statements, including the
related notes, and the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
In December 2003, we acquired The Roaring Water Bay Spirits
Group Limited and The Roaring Water Bay Spirits Marketing and
Sales Company Limited, together, with their subsidiaries,
referred to as Roaring Water Bay. The summary financial and
other data presented in the tables below includes the results of
operations of Roaring Water Bay commencing as of the
December 1, 2003 closing date of the acquisition. If we
assume, for comparative purposes only, that the acquisition
occurred as of April 1, 2003, the beginning of our fiscal
year ended March 31, 2004, our unaudited pro forma results
of operations for our fiscal year ended March 31, 2004
would have been: sales, net $8.6 million; gross profit
$3.5 million; net loss $(6.5) million; and net loss
per common share – basic and diluted $(2.92). These
pro forma results are not necessarily indicative, however, of
the results of operations that actually would have resulted had
the acquisition occurred on April 1, 2003 or of future
results.
In January 2005, we entered into a distribution agreement with
Gosling's Export (Bermuda) Limited, referred to as
Gosling's Export, giving us the exclusive distribution
rights with respect to the Gosling's rum products in the
United States and, subsequently, in the United Kingdom.
Thereafter, we expanded this relationship in February 2005, when
we purchased a 60% controlling interest in a newly formed entity
now named Gosling-Castle Partners Inc., a strategic venture that
was formed to acquire, through an export agreement with
Gosling's Export, the global (excluding Bermuda)
distribution rights with respect to the Gosling's rums,
including an assignment by Gosling's Export to
Gosling-Castle Partners of its rights under our January 2005
distribution agreement. This export agreement was entered into
with Gosling's Export in February 2005, prior to our
investment in Gosling-Castle Partners, and became effective on
April 1, 2005. The summary financial and other data
presented in the tables below include our sales of
Gosling's products in the United States and the United
Kingdom under our distribution agreement commencing as of its
January 1, 2005 effective date and include the results of
operations of Gosling-Castle Partners commencing as of the
February 18, 2005 closing date of our investment in such
entity, with adjustments for minority interest. Gosling-Castle
Partners had no operations prior to its February 2005 formation
and no meaningful operations prior to the April 1, 2005
commencement of its export agreement.
The "other data" presented below relates to our case
sales, which are measured based on the industry standard of
nine-liter equivalent cases, an important measure in our
industry that we use to evaluate the effectiveness of our
operations and overall financial performance. We believe that by
providing this information investors can better assess trends in
our business. Net sales per case is total net sales for the
applicable period presented, divided by the total number of
cases sold during the period. Gross profit per case and selling
expense per case are derived by dividing our gross profit and
selling expense, respectively, for the applicable period
presented by the number of cases sold for such period.
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Table of Contents
Three months ended
Year ended March 31,
June 30,
2003
2004
2005
2004
2005
(unaudited)
Consolidated statement of operations data
(in thousands,
    except per share data):
Sales, net
$
2,419
$
4,827
$
12,618
$
2,163
$
4,498
Cost of sales
1,427
3,285
8,745
1,482
2,647
Gross profit
992
1,542
3,873
681
1,851
Selling expense
3,348
5,398
11,569
2,978
3,225
General and administrative expense
818
1,960
3,637
795
1,138
Depreciation and amortization
73
173
167
26
182
Other (income)/expense, net
11
166
(199
)
23
322
Operating loss
(3,258
)
(6,155
)
(11,301
)
(3,142
)
(3,016
)
Interest expense, net
(182
)
(304
)
(998
)
(466
)
(259
)
Income tax benefit
—
—
—
—
37
Minority interests
—
35
5
2
129
Net loss
$
(3,440
)
$
(6,424
)
$
(12,294
)
$
(3,605
)
$
(3,109
)
Less: preferred stock dividends
15
558
526
86
71
Net loss attributable to common stockholders
$
(3,455
)
$
(6,982
)
$
(12,820
)
$
(3,691
)
$
(3,180
)
Net loss per common share — basic and diluted
$
(1.88
)
$
(3.12
)
$
(4.13
)
$
(1.19
)
$
(1.02
)
Weighted average common shares outstanding — basic and
    diluted
1,841
2,237
3,107
3,107
3,107
Pro forma net loss per common share — basic and
    diluted(1)
$
(1.65
)
$
(0.47
)
$
(0.41
)
Pro forma weighted average common shares outstanding —
    basic and diluted(1)
7,781
7,781
7,781
Other data
(unaudited):
Number of case sales
21,708
64,013
170,060
32,377
60,628
Net sales per case
$
111.43
$
75.41
$
74.20
$
66.81
$
74.19
Gross profit per case
$
45.70
$
24.09
$
22.77
$
21.03
$
30.53
Selling expense per case
$
154.23
$
84.33
$
68.03
$
91.98
$
53.19
(1)
Assumes the conversion as of April 1, 2004 of: all shares
    of preferred stock outstanding as of June 30, 2005,
    including 535,715 shares of Series A convertible
    preferred stock, 200,000 shares of Series B
    convertible preferred stock and 2,991,250 shares of
    Series C convertible preferred stock, into an aggregate of
    3,726,965 shares of common stock; the accrued and unpaid
    preferred stock dividends of $752,707 outstanding as of
    June 30, 2005 into 112,244 shares of common stock;
    the $1.7 million principal amount of our 5% euro
    denominated convertible notes outstanding as of June 30,
    2005 into 263,362 shares of common stock; and
    $4.0 million of the $10.0 million principal amount of
    our 6% convertible notes that was outstanding as of
    June 30, 2005 into 571,429 shares of common stock; for
    an aggregate of 4,674,000 shares of common stock.
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Table of Contents
Summary balance sheet data
(in thousands):
As of June 30, 2005
Pro forma
Actual
Pro forma
as adjusted
(unaudited)
Cash and cash equivalents
$
5,031
$
12,547
$
Working capital
8,020
15,535
Total assets
43,955
51,470
Total debt
20,133
17,474
Total liabilities
29,912
27,253
Total stockholders' equity (deficiency)
(15,084
)
21,016
The "pro forma" information included in the summary
balance sheet data as of June 30, 2005 gives effect at that
date to the following subsequent events:
•
our issuances in August 2005 of an additional
    362,500 shares of our Series C convertible preferred
    stock and an additional $5.0 million principal amount of
    our 6% convertible notes, for aggregate net proceeds to us
    of approximately $7.5 million;
•
our accrual of additional preferred stock dividends on our
    convertible preferred stock from July 1, 2005 through the
    estimated closing date of this offering in the aggregate amount
    of $145,246; and
•
our issuance of an additional 5,343,827 shares of our
    common stock upon (a) the conversion of all of our preferred
    stock, including the additional shares of Series C
    convertible preferred stock issued in August 2005, into
    4,089,465 shares, (b) our 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 June 30, 2005, with
    133,857 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, including
    $2.0 million of the additional notes issued in August 2005
    for 285,714 shares; all of which issuances will occur upon
    the consummation of this offering.
The "pro forma as adjusted" information as of
June 30, 2005 gives effect at that date to the foregoing
pro forma adjustments as well as to the following additional
events:
•
our sale of the 2,500,000 shares of common stock in this
    offering at an assumed initial public offering price of
    $           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 $629,418 of our outstanding indebtedness
    as of June 30, 2005.
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Table of Contents
RISK FACTORS
You should carefully consider the following risks and all
other information set forth in this prospectus before deciding
to invest in shares of our common stock. If any of the events or
developments described below actually occurs, our business,
financial condition and results of operations may suffer. In
that case, the trading price of our common stock may decline and
you could lose all or part of your investment.
Risks related to our business
Our future success is highly uncertain and cannot be
predicted based upon our limited operating history.
Although our predecessor was formed in 1998, most of our brands,
including Boru vodka, our leading brand, have only been acquired
or introduced by us since our formation in July 2003. As a
result, compared to most of our current and potential
competitors, we have a relatively short operating history and
our brands are early in their growth cycle. Additionally, we
anticipate acquiring brands in the future that are unlikely to
have established global brand recognition. Accordingly, it is
difficult to predict when or whether we will be financially and
operationally successful, making our business and future
prospects difficult to evaluate. In making your evaluation of
our prospects, you should consider that we are an emerging
company with products that, as yet, have limited brand
recognition and unproven global or broad-based market
acceptance. As a result, we may encounter many expenses, delays,
problems and difficulties that we have not anticipated and for
which we have not planned. If we are unable to address these
issues, if and when they arise, we may never be financially or
operationally successful.
We have a history of losses, we expect to experience
continuing losses for the foreseeable future, and we may never
achieve profitability.
We have incurred losses since inception and had an accumulated
loss of $33.2 million as of June 30, 2005. We believe
that we will continue to incur sizeable net losses for the
foreseeable future as we expect to make continued and
significant investment in product development, and sales and
marketing and to incur significant administrative expenses as we
seek to grow our current and future brands. We also anticipate
that our cash allocations will exceed our income from sales for
the foreseeable future. Despite our anticipated aggressive
marketing expenditures, our products may never achieve
widespread market acceptance and may not generate sales and
profits to justify our investment. In addition, we may find that
our expansion plans are more costly than we currently anticipate
and that they do not ultimately result in commensurate increases
in our sales, which would further increase our losses. If we
continue to incur expenses at a greater rate than our revenues,
we may never achieve profitability.
Our growth may be limited if we do not generate sufficient
cash to fund our operations. We may in the future need
additional financing to execute our business and continue our
growth, which may not be available on satisfactory terms or when
needed.
While the proceeds of this offering are expected to last us for
at least the next 12 months, we may require additional
capital in the future on an accelerated basis to fund our
business or our growth strategy (including potential
acquisitions), due to changes in our operations, acceleration of
our growth strategy, lower than anticipated product sales,
increased marketing, advertising and other costs or other
events. If, at such time, we have not generated sufficient cash
from operations to finance those additional capital needs, we
will need to raise additional funds through private or public
equity and/or debt financing. We cannot assure you that, if and
when needed, additional financing will be available to us on
acceptable terms or at all. If additional capital is needed and
either unavailable or cost prohibitive, our growth may be
limited as we may need to change our business strategy to slow
the rate of, or eliminate, our expansion or reduce or curtail
our operations. In addition, any additional financing we
undertake could impose covenants upon us that restrict our
operating flexibility, and, if we issue
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equity securities to raise capital, our existing stockholders
may experience dilution or the new securities may have rights
senior to those of our common stock.
We are dependent on a limited number of suppliers. Failure to
obtain satisfactory performance from our suppliers or loss of
our existing suppliers could cause us to lose sales, incur
additional costs and lose credibility in the marketplace. We
also have annual purchase obligations with certain suppliers.
We depend on a limited number of third-party suppliers for the
sourcing of all of our products, including both our own
proprietary brands and those we distribute for others. These
suppliers consist of third-party distillers, bottlers and
producers in the United States, Bermuda, the Caribbean and
Europe. We rely on the owners of Gosling's rum and Pallini
Limoncello to produce their brands for us. With respect to our
proprietary products, we, in several instances, rely on a single
supplier to fulfill one or all of the manufacturing functions
for one or more of our brands. For instance, The Carbery Group
is the sole distillery for Boru vodka, our leading brand; Irish
Distillers Limited is the sole provider of our single malt,
blended and grain Irish whiskey; Gaelic Heritage Corporation
Limited is the sole producer of our Celtic Crossing Irish
liqueur; and Terra Limited is not only the sole producer of our
Brady's Irish cream liqueur but also the only bottler of
both our Boru vodka and our Irish whiskeys. We do not have
long-term written agreements with all of our suppliers. In
addition, if we fail to complete purchases of products ordered
annually, certain suppliers have the right to bill us for
product not purchased during the period. The termination of our
written or oral agreements, or an adverse change in the terms of
these agreements could have a negative impact on our business.
If our suppliers increase their prices, we may not have
alternative sources of supply and may not be able to raise the
prices of our products to cover all or even a portion of the
increased costs. Our suppliers' failure to perform
satisfactorily or the loss of our existing suppliers, especially
our key suppliers, could cause us to fail to meet orders for our
products, lose sales, incur additional costs and/or expose us to
product quality issues. In turn, this could cause us to lose
credibility in the marketplace and damage our relationships with
distributors, ultimately leading to a decline in our business
and results of operations.
We cannot yet act as our own importer of record in the United
States and rely entirely on MHW Ltd. to perform this function
for us. The loss of its services could thus significantly
interrupt our U.S. sales and harm our reputation, our
business and our results of operations.
In the United States, there is a three-tier distribution system
for imported spirits: the imported brand is sold to a licensed
importer; the importer sells the imported brand to a wholesale
distributor; and the distributor sells the imported brand to
retail liquor stores, bars, restaurants and other outlets in the
states in which it is licensed to sell alcohol. While we own
most of our brands, we cannot yet act as our own importer as we
do not currently have any of the state licenses necessary to
sell our products to the distributors. We have, as a result,
historically depended on MHW Ltd. to serve in this capacity for
us. In addition to acting as importer of record for us, MHW also
provides and supervises storage and transportation of our
products to local wholesale distributors and provides several
accounting and payment related services to us. Until we are
licensed in a majority of the states and bring these services
in-house, the loss of MHW's services or its poor
performance, either nationally or at a state level, could
significantly interrupt or decrease our U.S. sales and harm
our reputation, our business and our results of operations. In
addition, while MHW purchases product from us to fill wholesale
orders, MHW is not liable to us for any unpaid balances due from
the distributors on these orders. Accordingly, the inability or
failure of MHW to collect accounts receivable from our
distributors could also cause a decline in our results of
operations.
In addition, until recently, it was much more cost effective for
us to use MHW as our U.S. importer and to rely on its state
licenses rather than expend the resources necessary to set up
the required licensing infrastructure internally. At this stage
of our growth, however, our fees to MHW, which are based in part
on our case sale volumes, are now reaching the point where it
may be more economical for us to assume the role of importer
ourselves. While we have commenced this process,
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we currently hold only the federal importer and wholesaler
license required by the Alcohol and Tobacco Tax and Trade
Bureau. Until we have obtained the requisite licenses in a
majority of the states, a process that could take as long as a
year, we must continue to rely on MHW to perform the importing
function for us and, if we continue to grow, pay increasing fees
to it for these services.
We are substantially dependent upon our independent wholesale
distributors. The failure or inability of even a few of our
distributors to adequately distribute our products within their
territories could harm our sales and result in a decline in our
results of operations.
We are required by law to use state licensed distributors or, in
18 states known as "control states," state-owned
agencies performing this function, to sell our products to
retail outlets, including liquor stores, bars, restaurants and
national chains in the United States. We have established
relationships for our brands with wholesale distributors in each
state; however, failure to maintain those relationships could
significantly and adversely affect our business, sales and
growth. Over the past decade there has been increasing
consolidation, both intrastate and interstate, among
distributors. As a result, many states now have only two or
three significant distributors. In addition, there are several
distributors that now control distribution for not just one
state but several states. As a result, if we fail to maintain
good relations with a distributor, our products could in some
instances be frozen out of one or more markets entirely. The
ultimate success of our products also depends in large part on
our distributors' ability and desire to distribute our
products to the desired U.S. target markets, as we rely
significantly on them for product placement and retail store
penetration. We have no distribution agreements or minimum sales
requirements with any of our distributors and they are under no
obligation to place our products or market our brands. Moreover,
all of them also distribute competitive brands and product
lines. We cannot assure you that our distributors will continue
to purchase our products, commit sufficient time and resources
to promote and market our brands and product lines or that they
can or will sell them to our desired or targeted markets. If
they do not, our sales will be harmed, resulting in a decline in
our results of operations.
While most of our international markets do not require the use
of independent distributors by law, we have chosen to conduct
our sales through distributors in all of our markets and,
accordingly, we face similar risks to those set forth above with
respect to our international distribution. In the Republic of
Ireland, one of our larger international markets, our
distributor has not historically carried all of our products,
and there are only a limited number of viable distributors.
The sales of our products could decrease significantly if we
cannot secure and maintain listings in the control states.
In the control states, the state liquor commissions act in place
of distributors and decide which products are to be purchased
and offered for sale in their respective states. Products
selected for listing must generally reach certain volumes and/or
profit levels to maintain their listings. Products are selected
for purchase and sale through listing procedures which are
generally made available to new products only at periodically
scheduled listing interviews. Products not selected for listings
can only be purchased by consumers through special orders, if at
all. If, in the future, we are unable to maintain our current
listings in the 18 control states, or secure and maintain
listings in those states for any additional products we may
acquire, sales of our products could decrease significantly.
If we are unable to identify and successfully acquire
additional premium brands that are complementary to our existing
portfolio, our growth will be limited, and, even if they are
acquired, we may not realize planned benefits due to integration
difficulties or other operating issues.
A key component of our growth strategy is the acquisition of
additional premium spirits brands that are complementary to our
existing portfolio through acquisitions of such brands or their
corporate owners, either directly or through mergers, joint
ventures, long-term exclusive distribution arrangements and/or
other strategic relationships. If we are unable to identify
suitable brand candidates and
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successfully execute our acquisition strategy our growth will be
limited. In addition, even if we are successful in acquiring
additional brands, we may not be able to achieve or maintain
profitability levels that justify our investment in, or realize
operating and economic efficiencies or other planned benefits
with respect to, those additional brands. The addition of new
products or businesses entails numerous risks with respect to
integration and other operating issues, any of which could have
a detrimental effect on our results of operations and/or the
value of our equity. These risks include:
•
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.
In addition, there are special risks associated with the
acquisition of additional brands through joint venture
arrangements. While we own a controlling interest in our
Gosling-Castle Partners Inc. strategic export venture, we may
not have the majority interest in, or control of, future joint
ventures that we may enter into. There is, therefore, risk that
our joint venture partners may at any time have economic,
business or legal interests or goals that are inconsistent with
our interests or goals or those of the joint venture. There is
also risk that our current or future joint venture partners may
be unable to meet their economic or other obligations and that
we may be required to fulfill those obligations alone.
Our ability to grow through the acquisition of additional brands
will also be dependent upon the availability of capital to
complete the necessary acquisition arrangements. We intend to
finance our brand acquisitions through a combination of the
proceeds of this offering, our available cash resources, bank
borrowings and, in appropriate circumstances, the further
issuance of equity and/or debt securities. Acquiring additional
brands could have a significant effect on our financial
position, and could cause substantial fluctuations in our
quarterly and yearly operating results. Also, acquisitions could
result in the recording of significant goodwill and intangible
assets on our financial statements, the amortization or
impairment of which would reduce reported earnings in subsequent
years.
Our quarterly operating results have fluctuated in the past
and may fluctuate significantly in the future rendering
quarter-to-quarter comparisons unreliable as indicators of
performance.
Our industry is subject to seasonality, with peak sales in each
major category generally occurring in the fourth calendar
quarter, which is our third fiscal quarter. As a result, our
third fiscal quarter revenues (those for the quarter ending
December 31) are generally significantly higher than
other quarters and, for the fiscal year ended March 31,
2005, accounted for over 36% of our revenues for that year. Our
quarterly revenues and operating results have also varied in the
past for other reasons and are likely to continue to vary
significantly from quarter to quarter in the future. As a
result, we believe that quarter-to-quarter comparisons of our
revenues and operating results are not meaningful, rendering
them unreliable as indicators of performance.
Factors that could cause quarterly fluctuations include, but are
not limited to:
•
seasonal purchasing patterns of distributors, retailers and
    consumers;
•
our and our suppliers' ability to handle increased orders;
•
delays in shipments of product from international suppliers;
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•
our ability to procure adequate shipping containers and ships to
    transport our products;
•
our commencement or completion of a major marketing campaign;
•
delays in obtaining raw materials such as bottles and packaging
    materials;
•
changes in the U.S. or international economies;
•
fluctuations in discretionary consumer spending;
•
changes in consumer preferences;
•
increases or decreases in U.S. or other federal excise
    taxes, or the aggregate effect of such tax changes in a number
    of U.S. states;
•
changes in interest rates and terms of borrowing;
•
significant fluctuations in the value of the U.S. dollar
    against other foreign currencies, which would affect the cost of
    product purchases and our cost of raw materials;
•
fluctuations in commodity prices;
•
new or revised regulatory requirements and accounting
    pronouncements;
•
delays in the launch of new products, including the timing of
    government approvals;
•
alcohol advertising restrictions, limitations on hours or places
    of sale or other measures adopted to restrict beverage sales
    (whether in the United States or abroad); and
•
the loss or addition of a brand.
The international nature of our business adds operating
risks, which could negatively impact our business.
While we focus on approximately seven primary geographic
markets, including the United States, we also sell our products
in over 10 other countries. We also purchase spirits and other
materials from entities in Ireland, the United Kingdom, Bermuda,
Italy, Guyana, the Caribbean and other foreign countries. The
risks and challenges associated with conducting business
internationally can include, among others:
•
the need to develop new distributor relationships;
•
fluctuations in currency exchange rates and currency
    devaluations;
•
differences and unexpected changes in the regulatory environment;
•
varying tax regimes;
•
exposure to different legal standards and enforcement mechanisms
    and associated compliance costs;
•
tariffs, duties, import/export controls and other trade barriers;
•
longer accounts receivable payment cycles and difficulties in
    collecting accounts receivable;
•
limited legal protection and enforcement of intellectual
    property rights;
•
difficulties in staffing and managing foreign operations;
•
potentially higher incidences of fraud; and
•
political instability and the possibility of wars and terrorist
    acts.
For the fiscal year ended March 31, 2005 and the three
months ended June 30, 2005, non-U.S. operations
accounted for approximately 47% and 37%, respectively, of
our revenues. Consequently, any negative impact from our
international business efforts could negatively impact the
operating results and financial condition of our business as a
whole.
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In addition, gains and losses on the conversion of foreign
payments into U.S. dollars may contribute to fluctuations
in our results of operations, and fluctuating exchange rates
could cause reduced revenues and/or gross margins from
non-U.S. dollar-denominated international sales. Also, for
the fiscal year ended March 31, 2005 and the three months
ended June 30, 2005, euro denominated sales accounted for
approximately 34% and 26%, respectively, of our total sales
volumes and British pound denominated sales accounted for
approximately 13% and 11%, respectively, of our total sales
volume, so a substantial change in the rate of exchange between
the U.S. dollar and the euro or British pound could have a
significant adverse affect on our financial results. In
addition, our ability to acquire spirits, and produce and sell
our products at favorable prices, will depend in part on the
relative strength of the U.S. dollar. We may not be able to
insure or hedge against these risks and we may not be able to
comply with all the applicable regulations, even if we expend
substantial additional resources to do so.
Our growth strategy may strain our resources. If we fail to
manage our growth, our ability to operate our business may be
harmed and we may be prevented from generating the revenue and
operating margins we expect.
Since December 2003, our business has grown significantly in
size and complexity. This growth has placed, and is expected to
continue to place, significant demands on our management,
systems, internal controls and financial and physical resources.
In addition, our planned growth strategy, including the
expansion of our product lines and the addition of agency
brands, will continue to require increased development efforts
and increased sales, marketing and promotion expenditures. We
also expect that the future growth of our operations will
require us to further develop our financial and managerial
controls and reporting systems. This expansion will place
significant demands on our management and may strain our
operational and financial resources, as well as our
infrastructure. The international nature of our expansion and
our multiple markets could put further strain on those
resources. Our failure to effectively manage our growth could
disrupt our operations and ultimately prevent us from generating
the revenue and operating margins we expect.
Consumer preferences are constantly changing. If we fail to
anticipate these changes and adjust our inventory, portfolio and
markets accordingly, we could experience lower sales and
decreased margins.
Our long-term success is dependent upon acceptance of our
products in the United States and various international markets.
Market acceptance is dependent on many complicated, interrelated
factors, many of which are not within our control, including
factors such as public perceptions and personal tastes.
Strengthening and maintaining our competitive position will
depend on our ability to offer products that have a strong
appeal to consumers. Even if we are successful in establishing
consumer awareness and acceptability for a brand, consumer
preferences may shift due to a variety of factors, including
changes in demographic and social trends, changes in dining,
recreational or leisure activity patterns and changes in the
economic climate. In order to be successful, we must accurately
anticipate consumer preferences and monitor and select the
appropriate markets for our brands. If we fail to anticipate
changes in consumer preferences and adjust our inventory,
portfolio and markets accordingly, we could experience lower
sales and decreased margins. In addition, any failure to keep
pace with changes in consumers' tastes could result in lost
opportunities, which could also reduce our sales.
Adverse public opinion about alcohol could reduce demand for
our products.
Anti-alcohol groups have, in the past, successfully advocated
more stringent labeling requirements, higher taxes and other
regulations designed to discourage consumption of beverage
alcohol. More restrictive regulations, negative publicity
regarding alcohol consumption and/or changes in consumer
perceptions of the relative healthfulness or safety of beverage
alcohol could decrease sales and consumption of alcohol and thus
the demand for our products. This could, in turn, significantly
decrease both our revenues and our revenue growth, causing a
decline in our results of operations.
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Class action or other litigation relating to alcohol abuse or
the misuse of alcohol could deplete our cash and divert our
personnel resources and, if successful, significantly harm our
business.
Our industry faces the possibility of class action or other
similar litigation alleging that the continued excessive use or
abuse of beverage alcohol has caused death or serious health
problems. It is also possible that federal, state or foreign
governments could assert that the use of alcohol has
significantly increased government funded health care costs.
Litigation or assertions of this type have adversely affected
companies in the tobacco industry, and it is possible that we,
as well as our suppliers, could be named in litigation of this
type.
In addition, lawsuits have been brought recently in nine states
alleging that beer and spirits manufacturers have improperly
targeted underage consumers in their advertising. The plaintiffs
in these actions claim that the defendants' advertising
"disproportionately" targeted underage consumers, by
using youthful themes, humor and other subjects that are
attractive to young persons. Plaintiffs in these cases allege
that the defendants' advertisements, marketing and
promotions violate the consumer protection or deceptive trade
practices statutes in each of these states and seek repayment of
the family funds expended by the underage consumers. While we
have not been named in these lawsuits, it is possible we could
be named in similar lawsuits in the future. Any class action or
other litigation asserted against us could be expensive and time
consuming to defend against, depleting our cash and diverting
our personnel resources and, if the plaintiffs in such actions
were to prevail, our business could be harmed significantly.
Our and our strategic partners' failure to protect our
respective trademarks, service marks and trade secrets could
compromise our competitive position and decrease the value of
our brand portfolio.
Our business and prospects depend in part on our, and with
respect to our agency or joint venture brands, our strategic
partners', ability to develop favorable consumer
recognition of our brands and trademarks. Although both we and
our strategic partners actively apply for registration of our
brands and trademarks, they could be imitated in ways that we
cannot prevent. In addition, we rely on trade secrets and
proprietary know-how, concepts and formulas. Our methods of
protecting this information may not be adequate. Moreover, we
may face claims of misappropriation or infringement of third
parties' rights that could interfere with our use of this
information. Defending these claims may be costly and, if
unsuccessful, may prevent us from continuing to use this
proprietary information in the future and result in a judgment
or monetary damages being levied against us. We do not maintain
non-competition agreements with all of our executives and key
personnel or with some of our key suppliers. If competitors
independently develop or otherwise obtain access to our or our
strategic partners' trade secrets, proprietary know-how or
recipes, the appeal, and thus the value, of our brand portfolio
could be reduced, negatively impacting our sales and growth
potential.
Failure to maintain and/or strengthen our competitive
position in the spirits industry could decrease our sales and/or
growth potential.
The beverage alcohol industry is highly competitive. We compete
on the basis of quality, price, brand recognition and
distribution strength. Our products compete with other beverage
alcohol products, in general, and premium brands, in particular,
for consumer purchases, as well as for distributor attention and
support, shelf space in retail stores, restaurant presence and
wholesaler attention. We compete with numerous national and
multinational developers and marketers of beverage alcohol, many
of which have far greater resources than we have. If we fail to
maintain and/or strengthen our competitive position in the
spirits industry, our sales and/or growth potential could be
harmed.
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We depend on our key personnel. If we lose the services of
any of these individuals or fail to hire and retain additional
management personnel as we grow, we may not be able to implement
our business strategy or operate our business effectively.
We rely on a small number of key individuals to implement our
plans and operations, including Mark Andrews, our chairman,
president and chief executive officer, Keith A. Bellinger,
our executive vice president and chief operating officer, and
T. Kelley Spillane, our senior vice president —
U.S. sales, as well as our other executive officers and our
regional and foreign sales managers. While we currently maintain
key person life insurance coverage on the lives of
Messrs. Andrews and Spillane, that insurance may not be
available to us in the future or the proceeds therefrom may not
be adequate to replace the services of these managers. To the
extent that the services of any of these individuals become
unavailable, we will be required to hire other qualified
personnel, and we may not be successful in finding or hiring
adequate replacements. As a result, if we lose the services of
any of these individuals, we may not be able to implement our
business strategy or operate our business effectively. Further,
our management of future growth and our successful integration
of any acquired brands or companies will require substantial
additional attention from our senior management team and require
us to retain additional qualified management personnel and to
attract and train new personnel. Failure to successfully retain
and hire needed personnel to manage our growth and development
would harm our ability to implement our business plan and grow
our business.
If the recent change in status of the former managing
directors of our Irish subsidiaries, from full-time employees to
part time consultants, were to harm any of our foreign
distribution and supplier relationships, our international sales
could decline and our production activities could be
interrupted.
We and the founders of our Irish subsidiaries, David Phelan and
Patrick Rigney, have recently modified
Messrs. Phelan's and Rigney's relationships with
our company from that of full-time employees of our Irish
subsidiaries and members of our board of directors to part-time
consultants, pursuant to consulting agreements with them
expiring in March 2007 and June 2006, respectively.
Messrs. Phelan and Rigney were instrumental in creating,
developing and marketing Boru vodka in Ireland, the
United Kingdom and a number of European countries, both
while with Roaring Water Bay and, following our merger in
2003, while with us. Messrs. Phelan and Rigney were also
responsible for developing the brand and obtaining its
production and bottling from The Carbery Group and Terra
Limited, both of which companies continue to be significant
suppliers of ours. If we were to lose any of our key
distributors or suppliers as a result of the change in status of
Messrs. Phelan or Rigney, or as a result of the loss of
their services upon the expiration of their consulting
agreements, we would need to engage other key distributors and
suppliers. If in such circumstances we were unable to engage
adequate replacement firms, our international sales could
decline and our production activities could be interrupted.
Regulatory decisions and changes in the legal, regulatory and
tax environment in the countries in which we operate could limit
our business activities or increase our operating costs and
reduce our margins.
Our business is subject to extensive regulation regarding
production, distribution, marketing, advertising and labeling of
beverage alcohol products in all of the countries in which we
operate. We are required to comply with these regulations and to
maintain various permits and licenses. We are also required to
conduct business only with holders of licenses to import,
warehouse, transport, distribute and sell spirits. We cannot
assure you that these and other governmental regulations
applicable to our industry will not change or become more
stringent. Moreover, because these laws and regulations are
subject to interpretation, we may not be able to predict when
and to what extent liability may arise. Additionally, due to
increasing public concern over alcohol-related societal
problems, including driving while intoxicated, underage
drinking, alcoholism and health consequences from the abuse of
alcohol, various levels of government may seek to impose
additional restrictions or limits on advertising or other
marketing activities promoting beverage alcohol products.
Failure to comply with any of the current or
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future regulations and requirements relating to our industry and
products could result in monetary penalties, suspension or even
revocation of our licenses and permits, or those of MHW on whom
we are currently dependent to import and distribute our products
in the United States. Costs of compliance with changes in
regulations could be significant and could harm our business, as
we could find it necessary to raise our prices in order to
maintain profit margins, which could lower the demand for our
products and reduce our sales and profit potential.
In addition, the distribution of beverage alcohol products is
subject to extensive taxation both in the United States and
internationally (and, in the United States, at both the federal
and state government levels), and beverage alcohol products
themselves are the subject of national import and excise duties
in most countries around the world. An increase in taxation or
in import or excise duties could also significantly harm our
sales revenue and margins, both through the reduction of overall
consumption and by encouraging consumers to switch to
lower-taxed categories of beverage alcohol.
We could face product liability or other related liabilities
that increase our costs of operations and harm our
reputation.
Although we maintain liability insurance and will attempt to
limit contractually our liability for damages arising from our
products, these measures may not be sufficient for us to
successfully avoid or limit liability. Our product liability
insurance coverage is limited to $1.0 million per
occurrence and $2.0 million in the aggregate and our
general liability umbrella policy is capped at
$10.0 million. Further, any contractual indemnification and
insurance coverage we have from parties supplying our products
is limited, as a practical matter, to the creditworthiness of
the indemnifying party and the insured limits of any insurance
provided by these suppliers. In any event, extensive product
liability claims could be costly to defend and/or costly to
resolve and could harm our reputation.
Contamination of our products and/or counterfeit or
confusingly similar products could harm the image and integrity
of, or decrease customer support for, our brands and decrease
our sales.
The success of our brands depends upon the positive image that
consumers have of them. Contamination, whether arising
accidentally or through deliberate third-party action, or other
events that harm the integrity or consumer support for our
brands, could affect the demand for our products. Contaminants
in raw materials purchased from third parties and used in the
production of our products or defects in the distillation
process could lead to low beverage quality as well as illness
among, or injury to, consumers of our products and could result
in reduced sales of the affected brand or all of our brands.
Also, to the extent that third parties sell products that are
either counterfeit versions of our brands or brands that look
like our brands, consumers of our brands could confuse our
products with products that they consider inferior. This could
cause them to refrain from purchasing our brands in the future
and in turn could impair our brand equity and adversely affect
our sales and operations.
We must maintain a relatively large inventory of our products
to support customer delivery requirements, and if this inventory
is lost due to theft, fire or other damage or becomes obsolete,
our results of operations would be negatively impacted.
We must maintain relatively large inventories to meet customer
delivery requirements for our products. We are always at risk of
loss of that inventory due to theft, fire or other damage, and
any such loss, whether insured against or not, could cause us to
fail to meet our orders and harm our sales and operating
results. In addition, our inventory may become obsolete as we
introduce new products, cease to produce old products or modify
the design of our products' packaging, which would increase
our operating losses and negatively impact our results of
operations.
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We have a material amount of goodwill and other intangible
assets. If, as a result of newly adopted accounting standards,
we are in the future required to write down a portion of this
goodwill and other intangible assets, it would increase our net
loss.
As of June 30, 2005, goodwill represented approximately
$11.8 million, or 27% of our total assets and other
intangible assets represented approximately $14.4 million,
or 33% of our total assets. Goodwill is the amount by which the
costs of an acquisition accounted for using the purchase method
exceed the fair value of the net assets acquired. We adopted
Statement of Financial Accounting Standard No. 142, or
SFAS No. 142, entitled "Goodwill and Other
Intangible Assets" in its entirety, on April 1, 2004.
Under SFAS No. 142, goodwill and indefinite lived
intangible assets are no longer amortized, but instead are
subject to a periodic impairment evaluation based on the fair
value of the reporting unit. Any write-down of goodwill or
intangible assets resulting from future periodic evaluations
would increase our net loss and those increases could be
material.
Our existing and future debt obligations could impair our
liquidity and financial condition.
As of June 30, 2005, we had consolidated senior and
subordinated notes payable of approximately $20.1 million
(or approximately $17.5 million after giving pro forma
effect to our issuance of an additional $5.0 million principal
amount of our 6% convertible notes in August 2005 and our
conversion in connection with this offering of approximately
$7.7 million principal amount of our outstanding
indebtedness into shares of our common stock). We are also
currently negotiating for a global credit facility and we may
incur additional debt in the future, under such credit line or
otherwise, to fund all or part of our capital requirements. Our
outstanding debt and future debt obligations could impair our
liquidity and could:
•
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.
If we were to fail in the future to make any required payment
under agreements governing our indebtedness or fail to comply
with the financial and operating covenants contained in those
agreements, we would be in default as regards to that
indebtedness. A debt default could significantly diminish the
market value and marketability of our common stock. If the
lenders were to require immediate payment, we might not have
sufficient assets to satisfy our obligations under our credit
facility, our subordinated notes or our other indebtedness. Our
lenders would have the ability to require that we immediately
pay all outstanding indebtedness, and we might not have
sufficient assets to satisfy their demands. In such event, we
could be forced to seek protection under bankruptcy laws, which
could significantly harm our reputation and sales and
significantly reduce the price of our common stock.
Risks related to this offering
The market price for our common stock may be volatile, and
you may not be able to sell our stock at a favorable price or at
all.
There has been no public market for our common stock prior to
this offering, and an active and liquid public market for our
common stock may not develop or be sustained after this
offering. The securities markets have recently experienced
extreme price and volume fluctuations. This market
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volatility, as well as general economic or political conditions,
could reduce the market price of our common stock regardless of
our operating performance. Additional factors that could cause
the market price of our common stock to rise and fall after this
offering, include the following:
•
variations in our actual or anticipated operating results;
•
our introduction of new brands or brand extensions and our
    ability to maintain existing brands;
•
performance of our suppliers and distributors of our brands;
•
increases in the amount and timing of operating costs and
    capital expenditures relating to expansion of operations;
•
recruitment or departure of key operating personnel;
•
changes in the estimates of our operating performance;
•
changes in recommendations by securities analysts of our common
    stock;
•
announcements of regulatory investigations of our operations or
    those of our suppliers;
•
competition;
•
changes in accounting principles; and
•
changes in federal, state or foreign regulations and taxes that
    may affect our industry.
In the past, companies that have experienced volatility in the
market price of their stock have been the subjects of securities
class action litigation. If we were the subject of securities
class action litigation, it could result in substantial costs,
liabilities and a diversion of management's attention and
resources, which could have a material adverse effect upon our
business and operating results. Finally, after completion of the
offering, given our relatively small market capitalization and
public float, we could experience low daily trading volumes in
our stock, which could give even a single large volume sale of
our common stock the potential to negatively impact the market
price of our common stock.
We may not be able to maintain our listing on the American
Stock Exchange, which may limit the ability of purchasers in
this offering to resell their common stock in the secondary
market.
Although we have applied, and expect that as of the date of this
prospectus we will be approved, to list our common stock on the
American Stock Exchange, we might not meet the criteria for
continued listing on the American Stock Exchange in the future.
If we are unable to meet the continued listing criteria of the
American Stock Exchange and became delisted, trading of our
common stock could be conducted in the Over-the-Counter
Bulletin Board. In such case, an investor would likely find
it more difficult to dispose of our common stock or to obtain
accurate market quotations for it. If our common stock is
delisted from the American Stock Exchange, it will become
subject to the Securities and Exchange Commission's
"penny stock rules," which impose sales practice
requirements on broker-dealers that sell that common stock to
persons other than established customers and "accredited
investors." Application of this rule could make
broker-dealers unable or unwilling to sell our common stock and
limit the ability of purchasers in this offering to resell their
common stock in the secondary market.
If you purchase shares of our common stock in this offering,
you will suffer immediate and substantial dilution in the net
tangible book value of your shares and may be subject to
additional future dilution.
Prior investors have paid less per share for our common stock
than the price in this offering. The initial public offering
price is substantially higher than the per share net tangible
book value of our
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common stock immediately after this offering. Therefore, based
on an assumed offering price of
$            per
share, the midpoint of the price range set forth on the cover
page of this prospectus, if you purchase our common stock in
this offering, you will suffer immediate and substantial
dilution of approximately
$            per
share. If the underwriters exercise their over-allotment option,
or if outstanding options and warrants to purchase our common
stock are exercised, you will experience additional dilution.
Any future equity issuances will result in even further dilution
to holders of our common stock.
Our executive officers, directors and principal stockholders
will continue to own a substantial percentage of our voting
stock after this offering, which will likely allow them to
control matters requiring stockholder approval. They could make
business decisions for us with which you disagree and that cause
our stock price to decline.
Upon the closing of this offering, our executive officers,
directors and principal stockholders will beneficially own
approximately 50% of our common stock. As a result, if they act
in concert, they could control matters requiring approval by our
stockholders, including the election of directors, and could
have the ability to prevent or cause a corporate transaction,
even if other stockholders, including those who purchase shares
in this offering, oppose such action. This concentration of
voting power could also have the effect of delaying, deterring,
or preventing a change of control or other business combination,
which could cause our stock price to decline.
Future sales of our common stock may cause the prevailing
market price to decrease and impair our capital raising
abilities.
Immediately following this offering, we will have
10,950,493 shares of common stock outstanding (assuming the
underwriters do not exercise their over-allotment option),
derivative securities, consisting of stock options, warrants and
convertible notes outstanding, that are exercisable or
convertible for the purchase of an additional
2,612,118 shares of our common stock and an additional
1,121,500 shares of common stock reserved for issuance upon the
exercise of options that may be granted under our stock
incentive plan. We will also have an additional
30,315,889 shares of our common stock, and
5,000,000 shares of blank check preferred stock, authorized
and available for issuance, which we may, in general, issue
without any action or approval by our stockholders, including in
connection with acquisitions or otherwise.
The 2,500,000 shares sold in this offering will be freely
tradable, except for any shares purchased by our
"affiliates" as defined in Rule 144 under the
Securities Act of 1933. Holders of the other
8,450,493 shares that will be outstanding and holders of
our derivative securities have agreed with the underwriters,
subject to certain exceptions, not to dispose of any of their
securities for a period of 180 days following the date of
this prospectus, except with the prior written consent of the
underwriters. After the expiration of this 180-day lock-up
period, these shares may be sold in the public market, subject
to prior registration or qualification for an exemption from
registration, including, in the case of shares held by our
affiliates, compliance with the volume restrictions of
Rule 144. The holders of substantially all of the
8,450,493 shares, as well as the holders of warrants
exercisable for the purchase of 598,618 shares, are also
entitled to certain piggy back registration rights with respect
to the public resale of their shares. In addition, following
this offering, we intend to file a registration statement
covering the shares issuable under our stock incentive plan.
The market price for our common stock could decline as a result
of sales of a large number of shares of our common stock in the
market after this offering, and even the perception that these
sales could occur may depress the market price. The sale of
shares issued upon the exercise or conversion of our derivative
securities could also further dilute your investment in our
common stock. Further, the sale of any of the foregoing shares
could impair our ability to raise capital through the sale of
additional equity securities.
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We will have broad discretion over the use of proceeds from
this offering and may not apply them effectively or in the
manner currently contemplated.
While we currently expect to use the net proceeds from this
offering for brand development, debt retirement and working
capital and general corporate purposes, we will have broad
discretion to adjust the application and allocation of the net
proceeds should our expectations regarding future sales or cash
flow prove to be inaccurate or our anticipated business needs
change. As a result, we may use the proceeds in a manner
significantly different from our current plans and in ways with
which you do not approve. The success of our operations that are
influenced by capital expenditures and working capital
allocations will substantially depend upon our discretion and
judgment with respect to the application and allocation of the
net proceeds from this offering. The failure of our management
to apply these funds effectively could materially harm our
business and prospects.
We will incur increased costs as a result of being a public
company, which may divert management attention from our business
and impair our financial results.
As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
In addition, the Sarbanes-Oxley Act of 2002, as well as new
rules subsequently implemented by the Securities and Exchange
Commission and the American Stock Exchange, has required changes
in corporate governance practices of public companies. We expect
these new rules and regulations to increase our legal and
financial compliance costs and to make some activities more
time-consuming and costly. In addition, we will incur additional
costs associated with our public company reporting requirements.
We also expect these new rules and regulations to make it more
difficult and more expensive for us to obtain directors'
and officers' liability insurance, and we may be required
to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to
attract and retain qualified persons to serve on our board of
directors or as executive officers. We are currently evaluating
and monitoring developments with respect to these rules, and we
cannot predict or estimate the amount of additional costs we may
incur or the timing of such costs.
Failure to achieve and maintain effective internal controls
in accordance with Section 404 of the Sarbanes-Oxley Act
could have a material adverse effect on our ability to produce
accurate financial statements and on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002,
we will be required to furnish a report by our management on our
internal control over financial reporting. We have not been
subject to these requirements in the past. The internal control
report must contain (a) a statement of management's
responsibility for establishing and maintaining adequate
internal control over financial reporting, (b) a statement
identifying the framework used by management to conduct the
required evaluation of the effectiveness of our internal control
over financial reporting, (c) management's assessment
of the effectiveness of our internal control over financial
reporting as of the end of our most recent fiscal year,
including a statement as to whether or not internal control over
financial reporting is effective, and (d) a statement that
our independent registered public accounting firm has issued an
attestation report on management's assessment of internal
control over financial reporting.
To achieve compliance with Section 404 within the
prescribed period, we will be engaged in a process to document
and evaluate our internal control over financial reporting,
which is both costly and challenging. In this regard, we will
need to dedicate internal resources, engage outside consultants
and adopt a detailed work plan to (a) assess and document
the adequacy of internal control over financial reporting,
(b) take steps to improve control processes where
appropriate, (c) validate through testing that controls are
functioning as documented, and (d) implement a continuous
reporting and improvement process for internal control over
financial reporting. Despite our efforts, we can provide no
assurance as to our, or our independent registered public
accounting firm's, conclusions with respect to the
effectiveness of our internal control over financial reporting
under Section 404. There is a risk
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that neither we nor our independent registered public accounting
firm will be able to conclude within the prescribed timeframe
that our internal controls over financial reporting are
effective as required by Section 404. This could result in
an adverse reaction in the financial markets due to a loss of
confidence in the reliability of our financial statements.
Provisions in our amended and restated certificate of
incorporation, our amended and restated bylaws and Delaware law
could make it more difficult for a third party to acquire us,
discourage a takeover and adversely affect existing
stockholders.
Our amended and restated certificate of incorporation, our
amended and restated bylaws and the Delaware General Corporation
Law contain provisions that may have the effect of making more
difficult, delaying, or deterring attempts by others to obtain
control of our company, even when these attempts may be in the
best interests of our stockholders. These include provisions
limiting the stockholders' powers to remove directors or
take action by written consent instead of at a
stockholders' meeting. Our amended and restated certificate
of incorporation also authorizes our board of directors, without
stockholder approval, to issue one or more series of preferred
stock, which could have voting and conversion rights that
adversely affect or dilute the voting power of the holders of
our common stock. Delaware law also imposes conditions on the
voting of "control shares" and on certain business
combination transactions with "interested
stockholders."
These provisions and others that could be adopted in the future
could deter unsolicited takeovers or delay or prevent changes in
our control or management, including transactions in which
stockholders might otherwise receive a premium for their shares
over then current market prices. These provisions may also limit
the ability of stockholders to approve transactions that they
may deem to be in their best interests.
We do not expect to pay any dividends for the foreseeable
future. Investors in this offering may never obtain a return on
their investment.
You should not rely on an investment in our common stock to
provide dividend income. We do not anticipate that we will pay
any dividends to holders of our common stock in the foreseeable
future. Instead, we plan to retain any earnings to maintain and
expand our existing operations, further develop our brands and
finance the acquisition of additional brands. In addition, our
ability to pay dividends is prohibited by the terms of our
6% convertible notes and we expect that any future credit
facility will contain terms prohibiting or limiting the amount
of dividends that may be declared or paid on our common stock.
Accordingly, investors must rely on sales of their common stock
after price appreciation, which may never occur, as the only way
to realize any return on their investment. As a result,
investors seeking cash dividends should not purchase our common
stock.
Our determination of the public offering price for our common
stock is arbitrary.
The public offering price for our common stock has been
determined by negotiation between us and the underwriters and
does not necessarily bear any direct relationship to our assets,
results of operations, financial condition, book value or any
other recognized criterion of value and, therefore, might not be
indicative of prices that will prevail in the trading market.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These
statements relate to future
events, or our future financial performance. We have attempted
to identify forward-looking statements by terminology including
"anticipates," "believes," "can,"
"continue," "could," "estimates,"
"expects," "intends," "may,"
"plans," "potential," "predicts,"
"should," or "will" or the negative of these
terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties,
and other factors, including those discussed under "Risk
Factors." The following factors, among others, could cause
our actual results and performance to differ materially from the
results and performance projected in, or implied by, the
forward-looking statements:
•
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.
We assume no obligation to publicly update or revise these
forward-looking statements for any reason, or to update the
reasons actual results could differ materially from those
anticipated in, or implied by, these forward-looking statements,
even if new information becomes available in the future.
MARKET DATA AND FORECASTS
Unless otherwise indicated, information in this prospectus
concerning economic conditions and our industry is based on
information from independent industry analysts and publications,
including the IMPACT Databank Review and Forecast, Adams
Handbook, as well as our estimates. Our estimates are derived
from publicly available information released by third-party
sources, as well as data from our internal research, and are
based on such data and our knowledge of our industry, which we
believe to be reasonable. None of the independent industry
publications used in this prospectus was prepared on our or our
affiliates' behalf and none of the sources cited in this
prospectus has consented to the inclusion of any data from its
reports, nor have we sought their consent.
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USE OF PROCEEDS
We estimate that our net proceeds from the sale of the
2,500,000 shares of our common stock in this offering will
be
$           million.
"Net proceeds" is what we expect to receive after
paying the underwriters' discounts and commissions and
other expenses of the offering. For purposes of estimating net
proceeds, we are assuming that the public offering price will be
the midpoint of the estimated initial public offering price
range set forth on the cover page of this prospectus, which is
$            per
share.
We intend to use net proceeds from this offering for general
corporate purposes, including for:
•
sales and marketing activities;
•
capital commitments to our Gosling-Castle Partners Inc.
    strategic export venture (of the remaining $3.9 million of
    funding that we owe to Gosling-Castle Partners by April 2007, we
    will fund approximately $1.1 million in October 2005, an
    additional $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
€
521,646
    ($629,418) of the principal amount of indebtedness owed by us to
    former stockholders of our Irish subsidiaries; and
•
working capital needs.
We may also use a portion of the net proceeds of this offering
to invest in or acquire new brands through mergers, stock or
asset purchases, joint ventures, long-term exclusive distributor
arrangements and/or other strategic relationships, although we
have no present commitments or agreements with respect to any
such material acquisition or investment.
In addition, if we receive a commitment for a new credit
facility, we intend to use:
•
approximately $4.6 million of the net proceeds of this
    offering to repay the senior notes of Castle Brands (USA) Corp.,
    our wholly owned subsidiary, which are held by 27 holders,
    including approximately $2.6 million held by six of our
    officers, directors and principal stockholders. This
    indebtedness bears interest at a rate of 9% per annum and
    is due May 31, 2009; and
•
up to approximately $2.0 million of the net proceeds of
    this offering to repay the notes and other obligations held by
    Ulster Bank Ireland Limited and Ulster Bank Ltd. under various
    facilities extended to our Irish subsidiaries. This indebtedness
    consists of several facilities which bear interest at various
    rates ranging from 4.8% to 7.8% per annum. Each facility is
    payable on demand by the bank.
The amounts actually expended for each of the purposes listed
above (other than the repayment of indebtedness) and the timing
of our actual expenditures will depend on numerous factors,
including growth in our net sales, sales and marketing
activities, the terms of any brand acquisitions, amount of cash
generated or used by our operations and the other factors
described in "Risk Factors." We have not determined
the amount or timing of expenditures for the corporate purposes
listed above and will retain broad discretion in the allocation
and use of the net proceeds. Pending the uses described above,
we intend to invest the net proceeds in short-term,
interest-bearing, investment-grade securities.
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Table of Contents
DIVIDEND POLICY
We have never paid or declared dividends on our capital stock
other than the preferred stock dividends to be paid upon the
consummation of this offering in shares of our common stock. We
do not anticipate that we will pay any dividends to holders of
our common stock in the foreseeable future, as we currently plan
to retain any earnings to maintain and expand our existing
operations, further develop our brands and finance the
acquisition of additional brands. In addition, our ability to
pay dividends is subject to the consent of the holders of our
6% convertible notes and we expect that any future credit
facility will contain terms prohibiting or limiting the amount
of dividends that may be declared or paid on our common stock.
Payments of any cash dividends in the future, however, is within
the discretion of our board of directors and will depend on our
financial condition, results of operations and capital and legal
requirements as well as other factors deemed relevant by our
board of directors.
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Table of Contents
CAPITALIZATION
Please read the following capitalization table together with the
sections of this prospectus entitled "Selected Consolidated
Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and our consolidated financial statements and related notes
included elsewhere in this prospectus.
The following table sets forth our consolidated cash position
and capitalization as of June 30, 2005:
•
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 issuances in August 2005 of an additional
    362,500 shares of our Series C convertible preferred
    stock and an additional $5.0 million principal amount of
    our 6% convertible notes, for aggregate net proceeds to us
    of approximately $7.5 million;
•
our accrual of additional preferred stock dividends on our
    convertible preferred stock from July 1, 2005 through the
    estimated closing date of this offering in the aggregate amount
    of $145,246; and
•
our issuance of an additional 5,343,827 shares of our
    common stock upon a the conversion of all of our preferred
    stock, including the additional shares of Series C
    convertible preferred stock issued in August 2005, 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 June 30, 2005, with 133,857 shares
    of common stock, and (c) the conversion of
    $7.7 million of our indebtedness, including all of our 5%
    euro denominated convertible notes and $6.0 million
    principal amount, including $2.0 million of the additional
    notes issued in August 2005 for 285,714 shares, 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
•
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 2,500,000 shares of common stock offered by
    us in this offering at an assumed public offering price of
    $            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 $629,418 of our outstanding
    indebtedness as of June 30, 2005.
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Table of Contents
As of June 30, 2005
Pro forma
Actual
Pro forma
as adjusted
(in thousands, except number of shares)
Cash and cash equivalents
$
5,031
$
12,547
$
Indebtedness:
Current, and current maturities of, notes payable:
Ulster Bank facilities
$
114
$
114
$
Gosling's Export agreement
565
565
Roaring Water Bay stockholder loans(1)
147
147
Long-term notes payable, less current maturities:
9% senior notes
4,571
4,571
Ulster Bank facilities
1,397
1,397
6% convertible subordinated notes
10,000
9,000
Gosling's Export agreement
1,210
1,210
5% euro denominated convertible
subordinated notes
1,659
—
Roaring Water Bay stockholder loans(1)
455
455
Obligations under capital leases
15
15
Total indebtedness
$
20,133
$
17,474
$
Redeemable convertible preferred stock(2):
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 2,991,250 shares
    issued and outstanding (actual); no shares authorized, issued or
    outstanding (pro forma and pro forma as adjusted)
21,299
—
Total preferred stock
$
25,926
$
—
$
Preferred stock dividends payable
$
753
$
—
$
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 8,450,493 shares
    issued and outstanding (pro forma); and 45,000,000 shares
    authorized and 10,950,493 shares issued and outstanding
    (pro forma as adjusted)
31
85
Additional paid-in capital
17,965
54,011
Accumulated deficit
(33,180
)
(33,180
)
Accumulated other comprehensive loss
100
100
Total stockholders' equity (deficiency)
$
(15,084
)
$
21,016
$
Total capitalization
$
31,728
$
38,490
$
(1)
Does not give effect to an aggregate of $50,000 in imputed
    interest ascribed to these non-interest bearing notes.
(2)
Amounts shown are net of transaction costs, including the value
    attributed to placement agent warrants.
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DILUTION
If you invest in our common stock, your interest will be
immediately and substantially diluted to the extent of the
difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share
of our common stock after giving effect to this offering.
Our pro forma net tangible book value as of June 30, 2005
was approximately $(1.9) million or $(0.23) per share
of common stock after giving effect to:
•
our issuances in August 2005 of an additional $5.0 million
    principal amount of our 6% convertible notes and an
    additional 362,500 shares of our Series C convertible
    preferred stock, and our receipt of approximately
    $7.5 million in aggregate net proceeds therefrom;
•
accrual of additional dividends on our preferred stock from July
    1, 2005 through the estimated closing date of this offering in
    the amount of $145,246; and
•
the conversion in connection with this offering of all of our
    preferred stock, $897,953 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 5,343,827 shares of our common stock.
Pro forma net tangible book value per share is determined by
dividing net tangible book value, which is our tangible assets
(total assets less intangible assets and goodwill) less total
liabilities, by the pro forma number of shares of common stock
outstanding.
After giving effect to the sale of 2,500,000 shares of
common stock in this offering at an assumed initial public
offering price of
$            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 estimated underwriting discounts
and commissions and other offering expenses payable by us and
giving effect to our repayment from such proceeds of $629,418 of
the indebtedness outstanding as of June 30, 2005, our pro
forma as adjusted net tangible book value as of June 30,
2005, would have been
$            million
or
$            per
share of common stock. This represents an immediate increase in
the pro forma net tangible book value of
$            per
share to our existing stockholders and an immediate dilution in
the pro forma as adjusted net tangible book value of
$            per
share to you and the other investors in this offering.
Dilution in pro forma net tangible book value per share
represents the difference between the amount per share paid by
purchasers of our common stock in this offering and the pro
forma net tangible book value per share of our common stock
immediately after this offering.
Assumed initial public offering price per share
$
Pro forma net tangible book value per share as of June 30,
    2005
$
Increase in net tangible book value per share attributable to
    this offering
Pro forma as adjusted net tangible book value per share after
    this offering
Dilution in pro forma as adjusted net tangible book value per
    share to investors in this offering
$
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The following table sets forth the total consideration, and the
average price per share, paid to us for our common stock by our
existing stockholders, on a pro forma basis as of June 30,
2005, and the total consideration, and price per share, to be
paid to us by investors in this offering for the shares offered
in this offering, assuming an initial public offering price of
$            per
share, the midpoint of the range set forth on the cover page of
this prospectus, and before deducting the underwriting discounts
and commissions and other estimated offering expenses:
Shares purchased
Total consideration
Average
price per
Amount
Percent
Amount
Percent
share
Existing stockholders
8,450,493
77.2%
$
58,204,126
%
$
6.89
Investors in this offering
2,500,000
22.8
$
Total
10,950,493
100.0%
$
100.0%
The discussion and tables above exclude the options, warrants
and notes exercisable or convertible into shares of our common
stock that will remain outstanding after we close this offering.
As of September 27, 2005, we had outstanding options under
our stock incentive plan exercisable for the purchase of
878,500 shares, outstanding non-plan options exercisable
for the purchase of 10,000 shares, outstanding warrants
exercisable for the purchase of 598,618 shares and
outstanding notes convertible into 1,125,000 shares, all of
which will remain outstanding upon the completion of this
offering. All of these securities will be exercisable or
convertible into common stock at a price per share ($7.52 on a
weighted average basis) that is less than the initial public
offering price, resulting in further dilution to you and the
other investors in this offering.
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Table of Contents
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected consolidated financial
data and other data for the periods ended and as of the dates
indicated. The selected consolidated financial data for the
fiscal years ended March 31, 2003, 2004 and 2005 have been
derived from our historical audited consolidated financial
statements. The statement of operations data for the fiscal
years ended March 31, 2001 and 2002 is unaudited. The
selected consolidated financial data presented as of and for the
three months ended June 30, 2004 and 2005 have been derived
from our unaudited interim consolidated financial statements. In
the opinion of our management, our unaudited financial
statements for the fiscal years ended March 31, 2001 and
2002 and our interim consolidated financial statements for the
three months ended June 30, 2004 and 2005 include all
adjustments, consisting of only normal recurring adjustments,
that we considered necessary for a fair presentation of our
financial position and results of operations as of and for such
unaudited periods. The historical results are not necessarily
indicative of results to be expected for future periods, and
results for the three month period ended June 30, 2005 are
not necessarily indicative of results that may be expected for
the entire year ending March 31, 2006. You should read the
following selected consolidated financial data and other data in
conjunction with our consolidated financial statements,
including the related notes, and the section entitled
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in
this prospectus.
In December 2003, we acquired The Roaring Water Bay Spirits
Group Limited and The Roaring Water Bay Spirits Marketing and
Sales Company Limited, together, with their subsidiaries,
referred to as Roaring Water Bay. The summary financial and
other data presented in the tables below includes the results of
operations of Roaring Water Bay commencing as of the
December 1, 2003 closing date of the acquisition. If we
assume, for comparative purposes only, that the acquisition
occurred as of April 1, 2003, the beginning of our fiscal
year ended March 31, 2004, our unaudited pro forma
results of operations for our fiscal year ended March 31,
2004 would have been: sales, net $8.6 million; gross profit
$3.5 million; net loss $(6.5) million; and net loss
per common share – basic and diluted $(2.92). These
pro forma results are not necessarily indicative, however, of
the results of operations that actually would have resulted had
the acquisition occurred on April 1, 2003 or of future
results.
In January 2005, we entered into a distribution agreement with
Gosling's Export (Bermuda) Limited, referred to as
Gosling's Export, giving us the exclusive distribution
rights with respect to the Gosling's rum products in the
United States and, subsequently, in the United Kingdom.
Thereafter, we expanded this relationship in February 2005, when
we purchased a 60% controlling interest in a newly formed entity
now named Gosling-Castle Partners Inc., a strategic venture that
was formed to acquire, through an export agreement with
Gosling's Export, the global (excluding Bermuda)
distribution rights with respect to the Gosling's rums,
including an assignment by Gosling's Export to
Gosling-Castle Partners of its rights under our January 2005
distribution agreement. This export agreement was entered into
with Gosling's Export in February 2005, prior to our
investment in Gosling-Castle Partners, and became effective on
April 1, 2005. The summary financial and other data
presented in the tables below include our sales of
Gosling's products in the United States and the United
Kingdom under our distribution agreement commencing as of its
January 1, 2005 effective date and include the results of
operations of Gosling-Castle Partners commencing as of the
February 18, 2005 closing date of our investment in such
entity, with adjustments for minority interest. Gosling-Castle
Partners had no operations prior to its February 2005 formation
and no meaningful operations prior to the April 1, 2005
commencement of its export agreement.
The "other data" presented below relates to our case
sales, which are measured based on the industry standard of
nine-liter equivalent cases, an important measure in our
industry that we use to evaluate the effectiveness of our
operational strategies and overall financial performance. We
believe that by providing this information investors can better
assess trends in our business. Net sales per case is total net
sales for the applicable period presented, divided by the total
number of cases sold during
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the period. Gross profit per case and selling expense per case
are derived by dividing our gross profit and selling expense,
respectively, for the applicable period presented by the number
of cases sold for such period.
Three months ended
Year ended March 31,
June 30,
2001
2002
2003
2004
2005
2004
2005
(unaudited)
(unaudited)
Consolidated statement
of operations data
(in thousands, except per share data):
Sales, net
$
799
$
1,731
$
2,419
$
4,827
$
12,618
$
2,163
$
4,498
Cost of sales
393
1,074
1,427
3,285
8,745
1,482
2,647
Gross profit
406
657
992
1,542
3,873
681
1,851
Selling expense
1,399
2,497
3,348
5,398
11,569
2,978
3,225
General and administrative expense
657
1,013
818
1,960
3,637
795
1,138
Depreciation and amortization
20
59
73
173
167
26
182
Other (income)/expense, net
(11
)
3
11
166
(199
)
23
322
Operating loss
(1,659
)
(2,915
)
(3,258
)
(6,155
)
(11,301
)
(3,142
)
(3,016
)
Interest expense, net
(118
)
(92
)
(182
)
(304
)
(998
)
(466
)
(259
)
Income tax benefit
–
–
–
–
–
–
37
Minority interests
–
–
–
35
5
2
129
Net loss
$
(1,777
)
$
(3,007
)
$
(3,440
)
$
(6,424
)
$
(12,294
)
$
(3,605
)
$
(3,109
)
Less: preferred stock dividends
–
–
15
558
526
86
71
Net loss attributable to common stockholders
$
(1,777
)
$
(3,007
)
$
(3,455
)
$
(6,982
)
$
(12,820
)
$
(3,691
)
$
(3,180
)
Net loss per common share — basic and diluted
$
(2.60
)
$
(2.05
)
$
(1.88
)
$
(3.12
)
$
(4.13
)
$
(1.19
)
$
(1.02
)
Weighted average common 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)
$(1.65
)
$
(0.47
)
$
(0.41
)
Pro forma weighted average common shares outstanding-basic and
    diluted(1)
7,781
7,781
7,781
Other data
(unaudited):
Number of case sales
3,844
9,053
21,708
64,013
170,060
32,377
60,628
Net sales per case
$207.86
$
191.21
$
111.43
$
75.41
$
74.20
$
66.81
$
74.19
Gross profit per case
$105.62
$
72.57
$
45.70
$
24.09
$
22.77
$
21.03
$
30.53
Selling expense per case
$363.94
$
275.82
$
154.23
$
84.33
$
68.03
$
91.98
$
53.19
(1)
Assumes the conversion as of April 1, 2004 of: all shares
    of preferred stock outstanding as of June 30, 2005,
    including 535,715 shares of Series A convertible
    preferred stock, 200,000 shares of Series B
    convertible preferred stock and 2,991,250 shares of
    Series C convertible preferred stock, into an aggregate of
    3,726,965 shares of common stock; the accrued and unpaid
    preferred stock dividends of $752,707 outstanding as of
    June 30, 2005 into 112,244 shares of common stock; the
    $1.7 million principal amount of our 5% euro
    denominated convertible notes outstanding as of June 30,
    2005 into 263,362 shares of common stock; and $4.0 million
    of the $10.0 million principal amount of our 6% convertible
    notes that was outstanding as of June 30, 2005 into 571,429
    shares of common stock; for an aggregate of
    4,674,000 shares of common stock.
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Table of Contents
Selected balance sheet data
(in thousands):
As of June 30, 2005
As of March 31,
As of
June 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
$
3,482
$
5,031
$
12,547
$
Working capital (deficit)
(804
)
281
44
4,787
5,988
4,412
8,020
15,535
Total assets
2,045
3,822
4,528
27,759
43,255
29,035
43,955
51,470
Total debt
2,150
1,666
2,158
3,898
16,362
7,077
20,133
17,474
Total liabilities
2,588
2,835
3,674
8,259
26,173
13,143
29,912
27,253
Total stockholders' equity (deficiency).
(543
)
988
(1,445
)
169
(12,207
)
(3,943
)
(15,084
)
21,016
The "pro forma" information included in the summary
balance sheet data as of June 30, 2005 gives effect at that
date to the following subsequent events:
•
our issuances in August 2005 of 362,500 shares of our
    Series C convertible preferred stock and $5.0 million
    principal amount of our 6% convertible notes, for aggregate
    net proceeds to us of approximately $7.5 million;
•
our accrual of additional preferred stock dividends on our
    convertible preferred stock from July 1, 2005 through the
    estimated closing date of this offering in the aggregate amount
    of $145,246; and
•
our issuance of an additional 5,343,827 shares of our common
    stock upon the (a) conversion of all of our preferred
    stock, including the additional shares of Series C
    convertible preferred stock issued in August 2005, 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 June 30, 2005, with
    133,857 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; including $2.0 million of the
    additional notes issued in August 2005 for 285,714 shares; all
    of which issuances will occur upon the consummation of this
    offering.
The "pro forma as adjusted" information as of
June 30, 2005 gives effect at that date to the foregoing
pro forma adjustments as well as to the following additional
events:
•
our sale of the 2,500,000 shares of common stock in this
    offering at an assumed initial public offering price of
    $           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 $629,418 of our outstanding indebtedness
    as of June 30, 2005.
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Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in
conjunction with our financial statements and related notes
contained elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks, uncertainties,
and assumptions. Our actual results may differ materially from
those anticipated in these forward-looking statements as a
result of a variety of factors, including those set forth under
"Risk Factors" and elsewhere in this prospectus.
Overview
We develop and market premium branded spirits in several growing
market categories, including vodka, rum, Irish whiskey and
liqueurs/cordials, and we distribute these spirits in all 50
U.S. states, in six key European markets and certain other
international markets. Our brands include, among others, Boru
vodka, Gosling's rums, Knappogue Castle Whiskey and Pallini
Limoncello.
Our current growth strategy focuses on: (a) aggressive
brand development to encourage case sale and revenue growth of
our existing portfolio of brands through significant investment
in sales and marketing activities, including advertising,
promotion and direct sales personnel expense; and (b) the
selective addition of complementary premium brands through a
combination of strategic initiatives, including acquisitions,
joint ventures and long-term exclusive distribution arrangements.
Strategic
transactions
A review and understanding of the components of our historical
growth during the past three fiscal years and for the most
recent interim period should consider the timing of our most
significant strategic transactions, which are also referenced in
our comparative fiscal and interim analyses contained in
" – Results of operations." These
transactions for our company and our predecessor companies are
outlined below. In addition to the impact of these transactions,
we have had significant growth in our own brands and will
continue to focus on developing those brands.
Boru distribution agreement.
During the fiscal year ended
March 31, 2002, Great Spirits Company LLC, our predecessor
company, signed an exclusive distribution agreement for the
U.S. distribution of Boru vodka, which added a key spirit
category to our portfolio, expanded our U.S. market
presence and accelerated our growth. This agreement contributed
U.S. sales of Boru vodka in fiscal 2003 and 2004, although,
in the last four months of fiscal 2004, these sales were
included as a component of the overall sales contribution of
Roaring Water Bay, outlined below.
Roaring Water Bay acquisition.
On December 1, 2003,
we acquired The Roaring Water Bay Spirits Group Limited and its
affiliated companies, referred to as Roaring Water Bay, which
added the Boru vodka, Clontarf Irish whiskey and Brady's
Irish cream brands to our portfolio. While we were already
selling Boru vodka in the United States pursuant to the 2002
distribution agreement, the acquisition added significant Boru
vodka sales internationally, principally in the Republic of
Ireland and the United Kingdom. This acquisition is reflected in
our financial results for the last four months of our fiscal
year ended March 31, 2004 and in all subsequent periods.
Pallini Limoncello distribution agreement.
On
August 17, 2004, we signed an exclusive U.S. marketing
and distribution agreement for Pallini Limoncello. Sales of that
product are reflected in our results for the fiscal year ended
March 31, 2005 commencing as of August 2005, and in
all subsequent periods.
Gosling's rum distribution agreement.
On
January 1, 2005, we signed an exclusive
U.S. distribution agreement for Gosling's rum.
Gosling's rum sales are reflected in our financial results
for the last three months of the fiscal year ended
March 31, 2005 and for subsequent periods.
Gosling-Castle Partners export venture.
On
February 18, 2005, we reached agreement to expand our
Gosling's relationship by acquiring a 60% interest in a
newly formed global export venture with the Gosling family, now
named Gosling-Castle Partners, Inc., that was previously formed
to acquire, through an export agreement, the exclusive
distribution rights for Gosling's rums worldwide
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Table of Contents
except for the Gosling's home market of Bermuda, including
an assignment to such venture of the Gosling's rights under
our January 2005 distribution agreement. This export agreement
became effective on April 1, 2005. Because we own 60% of
Gosling-Castle Partners, its financial results are included in
our consolidated financial statements commencing as of our
February 2005 purchase of such interest, with adjustments for
minority interest; however, it had no meaningful operations
prior to the April 1, 2005 commencement of the export
agreement.
Operations overview
We generate revenue through the sale of our premium spirits to
our network of wholesale distributors or, in control states,
state-owned agencies, which, in turn, distribute our premium
brands to retail outlets. A number of factors affect our overall
level of sales, including the number of cases sold, price per
case, relative contribution by brand and geographic mix. Changes
in any of these factors may have a material impact on our
overall sales. In the United States, our sales price per case
includes excise tax and import duties, which are also reflected
in a corresponding increase in our cost of sales. Most of our
international sales are sold "in bond," with the
excise taxes paid by our customers upon shipment, thereby
resulting in lower relative revenue as well as a lower relative
cost of sales, although some of our United Kingdom sales are
sold "tax paid," as in the United States. Our sales
typically peak during our third fiscal quarter (October through
December) in anticipation of, and during, the holiday season.
See "Risk Factors – Our quarterly operating
results have fluctuated in the past and may fluctuate
significantly in the future, rendering sequential
quarter-to-quarter comparisons of our financial results
unreliable as indicators of performance." The difference
between sales and net sales principally reflects adjustments for
various distributor incentives.
Our gross profit margin is determined by the price at which we
are able to sell our products, our ability to control our cost
of sales, the relative mix of our case sales by brand and
geography and the impact of foreign currency fluctuations. Our
gross profit and cost of sales are principally driven by our
cost of procurement, bottling and packaging, which differ by
brand, as well as freight and warehousing costs. We purchase
certain of our products, such as Gosling's rums and Pallini
Limoncello, as finished products. For other products, we
purchase the components of our products, including the distilled
spirits, bottles and packaging materials, and have arrangements
with third parties for bottling and packaging. Our
U.S. sales typically have a higher absolute gross margin
than in other markets, as sales prices per case are generally
higher in the United States than elsewhere.
Selling expense principally includes advertising and marketing
expenditures and compensation paid to our marketing and sales
personnel. Our selling expense, as a percentage of sales and per
case, is presently high as compared to our competitors because
of our brand development, level of marketing spend and our
established sales force versus our relatively small base of case
sales and sales levels. We expect the absolute level of selling
expense to continue to increase in the coming years, but we
expect selling expense as a percentage of revenues and on a per
case basis to continue to decline, as our volumes expand and we
leverage our direct sales team over a larger number of brands.
General and administrative expenses include all corporate and
administrative functions that support our operations. These
expenses consist primarily of administrative payroll, occupancy
and related expenses and professional services. While we expect
these expenses to increase on an absolute basis as our sales
volumes continue to increase, we expect our general and
administrative expenses as a percentage of sales to continue to
decline due to economies of scale.
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Table of Contents
Financial performance overview
The following table sets forth certain information regarding our
case sales for fiscal 2003, 2004 and 2005 and the three months
ended June 30, 2004 and 2005. The data in the following
table is based on nine-liter equivalent cases, which is a
standard spirits industry metric.
Three months ended
Year ended March 31,
June 30,
Case sales
2003
2004
2005
2004
2005
Cases
United States
18,482
29,116
74,190
10,181
32,684
International
3,226
34,897
95,870
22,196
27,944
Total
21,708
64,013
170,060
32,377
60,628
Percentage of Cases
United States
85.1%
45.5%
43.6%
31.4%
53.9%
International
14.9
54.5
56.4
68.6
46.1
Total
100.0%
100.0%
100.0%
100.0%
100.0%
Critical accounting policies and estimates
The preparation of consolidated financial statements in
conformity with U.S. generally accepted accounting
principles requires us to make a number of 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. Such estimates and
assumptions affect the reported amounts of sales and expenses
during the reporting period. On an ongoing basis, we will
evaluate these estimates and assumptions based upon historical
experience and various other factors and circumstances. We
believe our estimates and assumptions are reasonable in the
circumstances; however, actual results may differ from these
estimates under different future conditions.
We believe that the estimates and assumptions discussed below
are most important to the portrayal of our financial condition
and results of operations, in that they require our most
difficult, subjective or complex judgments and form the basis
for the accounting policies deemed to be most critical to our
operations.
Revenue recognition
We recognize revenue from product sales when the product is
shipped to a customer (generally upon shipment to a distributor
or to a control state entity), 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. We do not offer a right of return but will accept
returns if we shipped the wrong product or wrong quantity.
Trade accounts
receivable
We record 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. We calculate this allowance based on our
history of write-offs, level of past due accounts based on
contractual terms of the receivables and our relationships with
and economic status of our bottlers and customers.
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Table of Contents
Inventory
Our inventory, which consists of distilled spirits, packaging
and finished goods, is valued at the lower of cost or market,
using the weighted average cost method. We assess the valuation
of our inventories and reduce the carrying value of those
inventories that are obsolete or in excess of our forecasted
usage to their estimated realizable value. We estimate the net
realizable value of such inventories based on analyses and
assumptions including, but not limited to, historical usage,
future demand and market requirements. Reduction to the carrying
value of inventories are recorded in cost of goods sold.
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, goodwill and other indefinite
lived intangible assets that arose from acquisitions was
$11.3 million and $11.8 million, respectively. On
April 1, 2004, we 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, if certain circumstances indicate a
possible impairment may exist, in accordance with the provisions
of SFAS No. 142.
We evaluate 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 values of the reporting units and the net fair values of
the identifiable assets and liabilities of such reporting units.
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.
Stock-based awards
We account for stock-based compensation for our 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 our estimated value of our
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. We account for stock-based awards to
non-employees using a fair value method in accordance with
SFAS No. 123.
FASB Statement 123 (Revision 2004), Share-Based
Payment, was issued in December 2004 and is effective as of the
beginning of the first quarter of the fiscal annual reporting
period that begins after June 15, 2005. We will adopt this
new statement beginning April 1, 2006. 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 123R beginning April 1, 2006. The Company expects
that the adoption of FAS 123R will have a material impact
on its
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Table of Contents
consolidated results of operations and earnings per share. The
Company has not yet determined the method of adoption or the
effect of adopting FAS 123R, 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 also not yet determined the impact of
FAS 123R on its compensation policies or plans, if any.
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 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 as of
the following dates:
As of March 31,
As of June 30,
2004
2005
2004
2005
(in thousands, except per share data)
Net loss attributable to common stockholders
$
(6,982
)
$
(12,820
)
$
(3,691
)
$
(3,180
)
Stock-based compensation expense determined under fair value
    method
–
(370
)
—
—
Pro forma net loss
$
(6,982
)
$
(13,190
)
$
(3,691
)
$
(3,180
)
Loss per share:
Basic and diluted – as reported
$
(3.12
)
$
(4.13
)
$
(1.19
)
$
(1.02
)
Basic and diluted – pro forma
$
(3.12
)
$
(4.25
)
$
(1.19
)
$
(1.02
)
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 4.4%; expected volatility 25%; and
expected life of 7.2 years. The weighted average fair value of
options granted in the fiscal years ended March 31, 2004
and 2005 was $2.17 and $2.69, respectively.
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. We believe 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 us.
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Table of Contents
Results of operations
The following table sets forth, for the periods indicated, the
percentage of net sales of certain items in our financial
statements.
Three months
Year ended March 31,
ended June 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
68.5
58.8
Gross profit
41.0
31.9
30.7
31.5
41.2
Selling expense
138.4
111.8
91.7
137.7
71.7
General and administrative expense
33.8
40.6
28.8
36.8
25.3
Depreciation and amortization
3.0
3.6
1.3
0.9
4.1
Other (income)/expense, net
0.5
3.4
(1.6
)
1.1
7.2
Operating loss
(134.7
)
(127.5
)
(89.5
)
(145.0
)
(67.1
)
Interest expense, net
(7.5
)
(6.3
)
(7.9
)
(21.5
)
(5.8
)
Income tax benefit
—
—
—
—
0.8
Minority interests
0.0
0.7
0.0
0.1
2.8
Net loss
(142.2
)
(133.1
)
(97.4
)
(166.4
)
(69.3
)
Less:
Preferred stock dividends
0.6
11.6
4.2
4.0
1.6
Net loss attributable to common stockholders
(142.8
)%
(144.7
)%
(101.6
)%
(170.4
)%
(70.9
)%
Three months ended
    June 30, 2005 compared with three months ended
    June 30, 2004
Net sales.
Net sales increased $2.3 million, or
108.0%, to $4.5 million in the three months ended
June 30, 2005 from $2.2 million in the comparable
prior period. Our cases sales, measured in nine-liter case
equivalents, increased 87.3% from 32,377 cases to 60,628 cases
between the periods. This increase primarily reflects the
January 2005 commencement of our U.S. distribution relationship,
and the April 1, 2005 commencement of Gosling-Castle
Partner's global export agreement, with respect to the
Gosling's rums; the addition of Pallini Limoncello; and a
continuation of increased case sales within our portfolio. Our
U.S. case sales as a percentage of total case sales
increased from 31.4% to 53.9% between these periods, which
reflected the effects of the Gosling's rums and Limoncello
agreements, and increased U.S. sales of other brands,
particularly Boru vodka and Clontarf Irish whiskey, which were
introduced into the U.S. market during the later period.
Gross profit.
Gross profit increased 171.8% to
$1.9 million during the three months ended June 30,
2005 from $0.7 million in the comparable prior period. Our
gross profit as a percent of net sales increased to 41.2% for
the three months ended June 30, 2005 compared to 31.5% for
the comparable prior year period. The greater increase in gross
profit, compared to net sales, primarily resulted from the
commencement of our Gosling-Castle Partners venture, which
contributed increased gross profit.
Selling expense.
Selling expense increased 8.3%, to
$3.2 million in the three months ended June 30, 2005
from $3.0 million in the comparable prior period. The
increase in the absolute amount of selling expense in the more
recent period is primarily attributable to Gosling-Castle
Partners, which initiated a significant consumer advertising
campaign. As a percentage of net sales, selling expense
decreased to 71.7%, compared to 137.7% for the comparable prior
period. This decrease is principally due to the leveraging of
our sales force and marketing expenditures across increased
sales volumes. We
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Table of Contents
believe that this general trend should continue over the next
few years, although it may vary from quarter to quarter.
General and administrative expense.
General and
administrative expense increased 43.0% to $1.1 million in
the three months ended June 30, 2005 from $0.8 million
in the comparable prior year period. This increase was primarily
due to the hiring of additional corporate personnel and
increased occupancy expense. As a percentage of net sales,
general and administrative expenses decreased to 25.3% for the
three months ended June 30, 2005 compared to 36.8% for the
comparable prior year period, due to economies of scales with
higher sales volumes.
Fiscal year ended
    March 31, 2005 compared with fiscal year ended
    March 31, 2004
Net sales.
Net sales increased $7.8 million, or
161.4%, to $12.6 million for the fiscal year ended
March 31, 2005 from $4.8 million for fiscal 2004. Our
equivalent case sales increased 165.6% from 64,013 to 170,060
cases between fiscal 2004 and 2005. This increase particularly
reflects our acquisition of Roaring Water Bay, which had a full
year effect in fiscal 2005 versus four months inclusion in
fiscal 2004. The sales increase was also affected by the
addition of our Pallini Limoncello and Gosling's rums
distribution agreements, and continued increased organic case
sales of our other brands. For fiscal 2005, case sales in the
United States accounted for 43.6% of total case sales, down
modestly from the prior fiscal year. While we experienced
significant growth in our U.S. sales in fiscal 2005, the
full year impact of Roaring Water Bay also significantly
increased our international sales.
Gross profit.
Gross profit increased 151.3% to
$3.9 million for the fiscal year ended March 31, 2005
from $1.5 million for fiscal 2004. As a percent of net
sales, gross margins decreased slightly to 30.7% for fiscal 2005
compared to 31.9% in the prior year, which reflected the
acquisition and distribution relationships outlined in net
sales, changes in the brand and geographic mix of our sales and
higher import costs due to a decline in the relative value of
the U.S. dollar.
Selling expense.
Selling expense increased 114.3%, to
$11.6 million for the fiscal year ended March 31, 2005
from $5.4 million for fiscal 2004. This increase was
primarily the result of our increased U.S. advertising
expenditures for Boru vodka, distributor sales incentives and
significant additions of sales personnel in the United States.
As a percent of net sales, selling expense for fiscal 2005
decreased to 91.7% compared to 111.8% in the prior year, based
on increasing economies of scale with higher sales volumes.
General and administrative expense.
General and
administrative expense increased 85.5% to $3.6 million for
the fiscal year ended March 31, 2005 from $2.0 million
for fiscal 2004. This primarily resulted from the full year
impact of the Roaring Water Bay acquisition, an increase in
occupancy expense due to office relocations in New York and
Dublin, and an investment in our administrative and systems
platforms. As a percentage of sales, general and administrative
expense decreased from 40.6% in fiscal 2004 to 28.8% for fiscal
2005 based on leveraging overhead costs with higher sales
volumes.
Fiscal year ended March 31, 2004 compared with fiscal
year ended March 31, 2003
Net sales.
Net sales increased $2.4 million, or
99.5%, to $4.8 million for the fiscal year ended
March 31, 2004 from $2.4 million for fiscal 2003. This
increase resulted primarily from the impact of the Roaring Water
Bay acquisition, which was included for four months in fiscal
2004, but not in the prior fiscal year. Our case sales increased
194.9% from 21,708 cases to 64,013 cases between fiscal 2003 and
2004. While U.S. sales increased on an absolute basis from
period to period, as a percentage of total sales, net case sales
in the United States accounted for 45.5% of total case sales in
fiscal 2004, down significantly from 85.1% in fiscal 2003. The
overall increase in sales and case sales principally reflected
the effects of our Roaring Water Bay acquisition and the
decrease in U.S. sales relative to total sales reflected
the significant increase in international sales as a result of
the same acquisition.
Gross profit.
Gross profit increased 55.5% to
$1.5 million for the fiscal year ended March 31, 2004
from $1.0 million for fiscal 2003. Our gross profit as a
percent of net sales decreased to 31.9%
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for fiscal 2004 compared to 41.0% for fiscal 2003. This absolute
increase and percentage decrease were primarily due to the
inclusion of the results of Roaring Water Bay.
Selling expense.
Selling expense increased 61.2%, to
$5.4 million for the fiscal year ended March 31, 2004
from $3.3 million for fiscal 2003. This increase was
primarily the result of our acquisition of Roaring Water Bay and
increased advertising and promotion costs. As a percent of net
sales, selling expense for fiscal 2004 decreased to 111.8%
compared to 138.4% for fiscal 2003, reflecting growth in sales
volumes at a rate that was higher than our sales expense.
General and administrative expense.
General and
administrative expense increased 139.6% to $2.0 million for
the fiscal year ended March 31, 2004 from $0.8 million
for fiscal 2003. As a percentage of sales, general and
administrative expense increased from 33.8% in fiscal 2003 to
40.6% for fiscal 2004. These increases primarily reflected
increased overhead and personnel costs related to our Roaring
Water Bay acquisition.
Potential fluctuations in quarterly results and
seasonality
See "Risk Factors — Our quarterly operating
results have fluctuated in the past and may fluctuate
significantly in the future, rendering sequential
quarter-to-quarter comparisons of our financial results
unreliable as indicators of performance."
Quarterly results of operations
The following table presents unaudited consolidated statements
of operations data for each of the thirteen quarters concluding
with the quarter ended June 30, 2005. We believe that all
necessary adjustments have been included to present fairly the
quarterly information when read in conjunction with our annual
financial statements and related notes. The operating results
for any quarter are not necessarily indicative of the results
for any subsequent quarter.
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
2004
Consolidated Statement of Operations Data
(in thousands, except per share data):
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
Other (income)/expense, net
(2
)
(1
)
8
6
15
(4
)
372
(218
)
Operating loss
(617
)
(662
)
(948
)
(1,031
)
(948
)
(1,076
)
(2,002
)
(2,130
)
Interest expense, net
(30
)
(40
)
(56
)
(56
)
(57
)
(57
)
(97
)
(93
)
Income tax benefit
—
—
—
—
—
—
—
—
Minority interests
—
—
—
—
—
—
5
31
Net loss
(647
)
(702
)
(1,004
)
(1,087
)
(1,005
)
(1,133
)
(2,094
)
(2,192
)
Less: Preferred stock dividends
—
—
—
15
45
87
87
339
Net loss attributable to common stockholders
$
(647
)
$
(702
)
$
(1,004
)
$
(1,102
)
$
(1,050
)
$
(1,220
)
$
(2,181
)
$
(2,531
)
Net loss per common share:
Basic
$
(0.38
)
$
(0.38
)
$
(0.50
)
$
(0.61
)
$
(0.58
)
$
(0.68
)
$
(0.97
)
$
(0.81
)
Diluted
$
(0.38
)
$
(0.38
)
$
(0.50
)
$
(0.61
)
$
(0.58
)
$
(0.68
)
$
(0.97
)
$
(0.81
)
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,
2004
2004
2004
2005
2005
Consolidated Statement of Operations Data
(in thousands, except per share data):
Sales, net
$
2,163
$
2,997
$
4,496
$
2,962
$
4,498
Cost of sales
1,483
1,996
3,087
2,178
2,647
Gross profit
680
1,001
1,409
784
1,851
Selling expense
2,978
2,974
3,480
2,137
3,225
General and administrative expense
795
977
965
900
1,138
Depreciation and amortization
26
24
29
88
182
Other (income)/expense, net
8
104
(149
)
(161
)
322
Operating loss
(3,127
)
(3,078
)
(2,916
)
(2,180
)
(3,016
)
Interest expense, net
(466
)
(175
)
(196
)
(161
)
(259
)
Income tax benefit
—
—
—
—
37
Minority interests
2
—
—
3
129
Net loss
(3,591
)
(3,253
)
(3,112
)
(2,338
)
(3,109
)
Less: Preferred stock dividends
86
87
177
176
71
Net loss attributable to common stockholders
$
(3,677
)
$
(3,340
)
$
(3,289
)
$
(2,514
)
$
(3,180
)
Net loss per common share:
Basic
$
(1.18
)
$
(1.07
)
$
(1.06
)
$
(0.81
)
$
(1.02
)
Diluted
$
(1.18
)
$
(1.07
)
$
(1.06
)
$
(0.81
)
$
(1.02
)
Weighted average shares used in computation:
Basic
3,107
3,107
3,107
3,107
3,107
Diluted
3,107
3,107
3,107
3,107
3,107
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Liquidity and capital resources
Our primary uses of cash have been for new product development,
selling and marketing expense, employee compensation and working
capital. Our main sources of cash have been from the sale of
common and preferred stock, the sale of convertible and senior
notes and borrowings under bank credit facilities.
Our balance of cash and cash equivalents was $5.0 million
at June 30, 2005 as compared to $5.7 million at
March 31, 2005. In August 2005, we completed additional
financings, including the placement of $5.0 million of
additional 6% convertible notes and the sale of $2.9
million of additional Series C convertible preferred stock
for aggregate net proceeds of $7.5 million.
Cash flows
The following table summarizes our primary sources and uses of
cash during the periods presented (in thousands):
Three months
ended
Year ended March 31,
June 30,
2003
2004
2005
2004
2005
Net cash provided by (used in):
Operating activities
$
(3,833
)
$
(5,373
)
$
(13,198
)
$
(2,474
)
$
(4,524
)
Investing activities
(21
)
(6,723
)
(598
)
(457
)
(82
)
Financing activities
3,920
15,313
16,009
2,952
3,973
Net increase (decrease) in cash and cash equivalents
$
66
$
3,217
$
2,213
$
21
$
(633
)
Operating activities.
A substantial portion of our
available cash has been used to fund our operating activities.
In general, these cash funding requirements are based on
operating losses, driven chiefly by our sizable allocations to
selling and marketing expense. With increases in our overall
sales volumes, we have also utilized cash to fund our
receivables and inventories. In general, these increases are
only partially offset by increases in our accounts payable to
our suppliers and accrued expenses. Our business has incurred
significant losses since inception.
On average, the production cycle for our owned brands can take
as long as three months from the time we obtain the distilled
spirits and other materials needed to bottle and package our
products to the time we receive products available for sale,
which is impacted by the international nature of our business.
With respect to Gosling's rums and Pallini Limoncello, we
do not produce the finished product and, instead, receive the
finished product directly from the owners of such brands. From
the time we have products available for sale, an additional
three to four months may be required before we sell our
inventory and collect payment from our customers.
In the three months ended June 30, 2005, net cash used in
operating activities was $4.5 million, consisting primarily
of losses from our operations of $3.1 million, a
$1.0 million increase in accounts receivable and a
$0.5 million reduction in accounts payable and accrued
expenses. In the three months ended June 30, 2004, net cash
used in operating activities was $2.5 million, consisting
primarily of losses from our operations of $3.6 million,
which was offset by a $1.3 million increase in accounts
payable and accrued expenses.
Net cash from operations used in the fiscal year ended
March 31, 2005 was $13.2 million, consisting primarily
of losses from operations of $12.3 million, an increase in
accounts receivable of $1.8 million, an increase in
inventory of $1.6 million and an increase in other assets
of $0.9 million, partially offset by an increase in
accounts payable and accrued expenses of $1.7 million. Net
cash from
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operations used in the fiscal year ended March 31, 2004 was
$5.4 million and was attributable to our operating losses
of $6.4 million and a decrease of $0.3 million in our
accounts payable and accrued expenses. Net cash used in the
fiscal year ended March 31, 2003 was $3.8 million,
consisting primarily of losses from operations of
$3.4 million and an increase of $0.4 million in
inventory.
Investing activities.
Since April 1, 2002, the
single largest use of cash in investing activities was
$6.7 million in the year ending March 31, 2004, which
was used as a part of the $17.0 million total consideration
used to acquire the controlling interest of Roaring Water Bay,
with a subsequent purchase of minority interest for $0.4 million.
Financing activities.
During the three years
ending March 31, 2005, in order to fund the above operating
and investing activities, our total net cash from financing
activities was approximately $35.0 million, which came
primarily from our issuances of convertible preferred stock,
senior notes and convertible subordinated debt.
Net cash provided by financing activities during the three
months ended June 30, 2005 was $4.0 million and
consisted primarily of funds raised from the second tranche of
our 6% convertible note financing. A portion of these funds
was used during that period to fund our initial capital
investment of $1.1 million in Gosling-Castle Partners.
Upon consummation of this offering, we believe that we will be
able to fund our operations from the proceeds of this offering,
our projected cash flow from operations and current cash and
cash equivalents for at least twelve months succeeding the
closing of this offering. Beyond that, additional financing may
be needed to fund working capital and other requirements.
Changes in our operating plans, acquisitions or other additions
of brands, lower than anticipated sales, increased expenses, or
other events, including those described in "Risk
Factors," may require us to seek additional debt or equity
financing on an accelerated basis. Financing may not be
available on acceptable terms, or at all, and our failure to
raise capital when needed could impact negatively our growth
plans, financial condition and results of operations. Additional
equity financing may be dilutive to the holders of our common
stock, and debt financing, if available, may involve significant
cash payment obligations or financial covenants and ratios that
restrict our ability to operate our business.
Obligations
    and commitments
We are in preliminary discussions relating to the establishment
of a credit line with one or more financial institutions. If
such a facility is established, we intend to retire our current
secured credit facilities and repay our 9% senior notes and may
do so without penalty.
Credit
    facilities
We have credit facilities with availability aggregating
approximately
€
1.7 million
($2.1 million) with two affiliated Irish banks, including
overdraft, customs and excise guaranty, forward currency
dealing, revolving credit and accounts receivable facilities.
These facilities, which are payable on demand and renew annually
and have interest rates ranging from prime plus 3% to
7.85%. We also arranged revolving credit facilities aggregating
approximately £242,000 ($436,762) with the same lender for
working capital purposes. These other banking facilities are
also payable on demand and renew annually subject to certain
provisions, have interest rates ranging from prime plus 2%
to prime plus 2.25%. We also secured
a
€
295,000
($355,947) term note with the same lender. We have deposited
€
300,000 with the
banks to secure these borrowings. The term note carries an
interest rate of 5.2% and calls for monthly payments of
principal and interest
of
€
6,377
through 2006.
As of March 31, 2004, we established a revolving credit
facility with an Irish bank of which the outstanding balance was
repaid, together with a loan termination fee of $60,000 and
accrued interest and fees of $4,176. This line of credit was
terminated simultaneously with the issuance of the senior notes
in June 2004.
9% Senior notes.
On June 9, September 28 and
October 13, 2004, our wholly owned subsidiary Castle Brands
(USA), issued to 27 individuals $4.6 million of
senior notes secured by
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accounts receivable and inventories of Castle Brands (USA). As
issued, these senior notes bore an interest rate of 8%, payable
semi-annually on November 30th and May 31st, and were
to mature on May 31, 2007. The senior notes are guaranteed
as to payment by us. 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, these notes were accompanied by warrants to
purchase 25 shares of our common stock at $8.00 a
share for every $1,000 principal amount of such notes for an
aggregate of 116,500 shares.
The senior notes are subject to customary restrictive covenants.
In addition, the consent of holders of a requisite majority of
the aggregate principal amount of these notes is required for
Castle Brands (USA) to take any of the following actions: merge
or consolidate or sell all or substantially all of its assets
other than with an entity formed in the United States or to a
person or entity that assumes all of our obligations under the
senior notes, engage in a transaction with an affiliate unless
the transaction is on fair and reasonable terms, or change our
jurisdiction of incorporation without giving 60 days prior
notice.
If we or Castle Brands (USA) were to default on the payment of
principal or interest on our senior notes and the default
continues for 20 business days, breach any representation,
warranty or certification made in the senior note documents,
default in the performance of the material obligations under the
senior note documents, which default is unremedied for a period
of 60 days after we receive notice of such default, enter
into any arrangement for the benefit of creditors or otherwise
wind-up or dissolve, then the holders of our senior notes could
declare all principal and interest to be immediately payable.
6% subordinated convertible notes.
On
March 1, 2005, we entered into a convertible note purchase
agreement for up to $10.0 million, with the principal
amount convertible, at the option of the holder, at a conversion
price of $8.00 per share. The convertible note agreement was
amended on August 16, 2005 to (a) increase the amount of
loans under such agreement to $15.0 million and (b) provide
for 40% of the outstanding principal amount of the notes to
convert automatically into common stock upon an initial public
offering of our common stock at a conversion price of $7.00 per
share. Currently, there are three 6% convertible promissory
notes outstanding for $5.0 million each. These notes were
issued on March 1, 2005, June 27, 2005 and
August 16, 2005 and mature on March 1, 2010. They bear
interest at the rate of 6% per annum, payable quarterly, at
our option for a period of two years from the date of the note,
in cash or in additional notes bearing an interest rate of
7.5% per annum. We may not prepay our 6% convertible
notes without the consent of the holders.
In accordance with the amended terms, $6.0 million of our
6% convertible notes will automatically convert into shares
of our common stock at a price of $7.00 per share upon an
initial public offering of our common stock. The outstanding
balance of our 6% convertible notes may be converted into
common stock at any time at the option of the holders at a
conversion rate of $8.00 per share and will automatically
convert at such time as the closing price of our common stock is
$20.00 per share or more for thirty consecutive days at any
time after March 1, 2008. The 6% convertible notes are
unsecured.
These 6% convertible notes are subject to a number of
customary restrictive covenants and certain potential limits on
future indebtedness, excluding qualified brand acquisition
indebtedness, and which are impacted by our aggregate equity
market capitalization. As long as there is at least
$1.5 million aggregate principal amount outstanding under
these notes: (a) the approval of holders of at least a
majority of the aggregate principal amount of the
6% convertible notes outstanding is required before we may
pay dividends or make a distribution or payment on our equity
securities or redeem or repurchase our equity securities (other
than repurchases from employees upon termination of their
employment) and (b) the approval of holders of at least 70%
of the aggregate principal amount of the 6% convertible
notes outstanding is required before we may engage in a
transaction with an affiliate or incur indebtedness in excess of
$30.0 million; provided, however, that the indebtedness
covenant will no
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longer be applicable if the product of our fully diluted
securities multiplied by the average of the highest bid and
lowest asked prices on the exchange or over-the-counter
quotation system on which our common stock is listed is at least
$100.0 million for a period of at least 90 days. The
limit on indebtedness does not include indebtedness that is
incurred in connection with the acquisition of a brand related
to, or an entity doing business in or related to, the beverage
alcohol market, to the extent such indebtedness (including costs
and fees associated with incurring such debt) does not exceed an
amount equal to three times the target's earnings before
interest, taxes, depreciation and amortization.
If we were to default on the payment of principal or interest on
our 6% convertible notes, fail to pay any other debt for
borrowed money in excess of $250,000 when it is due and payable,
fail to perform the affirmative covenants contained in the
convertible note purchase agreement, and fail to cure such
failure within 10 business days or fail to perform, keep or
observe any material term, provision, covenant or agreement
contained in the convertible note purchase agreement or any of
the notes issued under the agreement and fail to cure within
20 days, then the holders of our 6% convertible notes
could declare all principal and interest to be immediately
payable.
Upon the consummation of this offering, $6.0 million
principal amount of our 6% convertible notes will automatically
convert into 857,143 shares of our common stock.
Gosling's export venture.
On
February 18, 2005, in connection with our investment in the
Gosling-Castle Partners Inc. strategic export venture with the
Gosling's family, we issued a promissory note to
Gosling-Castle Partners (now our 60% owned subsidiary) in the
amount of $4.9 million. This promissory note is due in
installments as follows:
$1,025,000 was due April 1,
    2005 and was paid;
$1,125,000 is due October 1,
    2005;
$1,000,000 is due April 1,
    2006;
$1,000,000 is due October 1,
    2006; and
$750,000 is due April 1, 2007.
This note bears interest at the rate of 4% per annum
beginning October 1, 2005. There are no restrictive
covenants.
Under Gosling-Castle Partners' exclusive export agreement
with Gosling's Export (Bermuda) Limited, Gosling-Castle
Partners is required to pay $2.5 million to Gosling's
Export (Bermuda) Limited in exchange for the distribution rights
set forth in such agreement in four equal installments on
April 1, 2005, October 1, 2005, April 1, 2006 and
October 1, 2006. As of June 30, 2005, Gosling-Castle
Partners has remaining aggregate payments of approximately
$1.9 million.
5% Euro denominated convertible subordinated
notes.
In connection with the acquisition of Roaring
Water Bay on December 1, 2003, we issued an aggregate
principal amount
of
€
1,374,750
(recorded as $1,658,773 in our convertible financial statements
as of June 30, 2005) of our 5% euro denominated convertible
subordinated notes due December 1, 2006. These notes bear
interest at the rate of 5% per annum and are convertible
into shares of our common stock at a conversion price of
€
5.22 per
share.
These 5% euro denominated convertible subordinated notes are
subject to customary restrictive covenants. In addition, the
consent of holders of a majority of the aggregate principal
amount of these notes was required for, and obtained by, us to
file the registration statement of which this prospectus forms a
part.
If we were to default on the payment of principal or interest on
our 5% euro denominated convertible subordinated notes and such
default were to continue for 30 days after we receive
notice of such default, fail to pay any other debt for borrowed
money in excess of $250,000 when it is due and payable and such
default continues for 30 days after we receive notice of
such default, fail to comply with any agreements contained in
such note and such failure continues for 30 days after we
receive
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notice or we enter into any arrangement for the benefit of
creditors or otherwise wind-up, dissolve or commence a
bankruptcy proceeding, then the holders of our 5% euro
denominated convertible subordinated notes could declare all
principal and interest to be immediately payable.
Upon the consummation of this offering, all of our 5% euro
denominated convertible subordinated notes will automatically
convert into 263,492 shares of our common stock, and all of
the interest accrued on these notes through the closing date of
this offering will be paid out of the proceeds of this offering.
The Roaring Water Bay related notes.
In December
2003, in connection with our acquisition of Roaring Water Bay,
we issued to the stockholders of Roaring Water Bay subordinated
notes in the principal amount of
€
444,389
($536,200). These notes are non-interest bearing and the
principal is due in installments of
€
177,743,
€
133,323
and
€
133,323
on December 1, 2004, 2005 and 2006, respectively. A total
of
€
177,743
of the principal amount of these notes has been repaid.
If we were to default on the payment of principal on our
non-interest bearing notes and such default continues for
25 days after we receive notice of such default, then the
holders of the non-interest bearing notes could declare all
principal to be immediately payable.
In connection with the acquisition, we also issued
5.7% subordinated notes due July 11, 2007, in the
principal amount
of
€
255,000
($307,683) in exchange for the elimination of certain common
share rights of the Roaring Water Bay stockholders. These notes
accrue interest at a rate of 5.7% per annum with the
aggregate interest payable being limited to
€
51,000. The
total principal and interest on the notes are due at maturity.
These notes do not contain any restrictive covenants.
If we were to default on the payment of principal or interest on
our 5.7% subordinated notes and such default continues for
30 days after we receive notice of the default, the holders
of our 5.7% convertible notes could declare all principal
and interest due at any time after 90 days from the
default. If, among other things, any meeting of our creditors is
held or we make any arrangement for the benefit of creditors or
we otherwise wind-up or dissolve, fail to pay any other material
indebtedness when due, or undertake to sell all or substantially
all of our assets, then the holders of our 5.7% convertible
notes could declare all principal and interest to be immediately
payable.
We intend to use approximately $629,418 from the proceeds of
this offering to prepay all of the remaining principal balance
outstanding under both these non-interest bearing notes and the
5.7% subordinated notes. We will also pay from such proceeds all
accrued and unpaid interest on these notes through the closing
date of this offering.
Office equipment leases.
We financed the purchase
of certain office equipment totaling $17,821. The equipment
leases call for monthly payments of principal and interest at
the rate of 5% per annum, to be paid through
July 2009. As of March 31, 2005, we owed $15,998 under
this lease.
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Future commitments of notes and capital lease.
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 ending
March 31,
Amount
(in thousands)
2006
$
3,032
2007
1,225
2008
30
2009
341
2010
9,662
Total
$
14,290
Less current portion
3,032
Non-current portion
$
11,258
Convertible preferred stock.
Pursuant to a series
of private offerings, we have issued and currently have
outstanding 535,715 shares of our Series A convertible
preferred stock, 200,000 shares of our Series B convertible
preferred stock and 3,353,750 shares of our Series C
convertible preferred stock, for which we obtained gross
proceeds of $31.8 million, including $10.4 million
since March 31, 2004.
Holders of our Series A preferred stock and Series B
preferred stock are entitled to cumulative dividends beginning
on December 1, 2003, at a current rate of 7.0% per
annum. Holders of our Series C preferred stock are entitled
to cumulative dividends beginning on December 1, 2005 at a
rate of 4.0% per annum.
We are required to redeem 20% of our Series A preferred
stock, Series B preferred stock and Series C preferred
stock at the original issue price, plus all accrued and unpaid
dividends, if any, on February 20, 2009 and each
February 20 thereafter with respect to our Series A
preferred stock and Series B preferred stock and
December 1, 2009 and each December 1 thereafter with
respect to our Series C preferred stock.
All of our Series A preferred stock, Series B
preferred stock and Series C preferred stock will
automatically convert into an aggregate of 4,089,465 shares of
our common stock, and all of the dividends accrued on our
preferred stock through the closing date of this offering will
be converted into shares of our common stock, upon the
consummation of this offering (an estimated 133,857 additional
shares based on estimated dividends of $897,953 through the
closing date).
Contractual obligations
The following table sets forth our contractual commitments as of
March 31, 2005:
Payments due by year
2006
2007
2008
2009
2010
Thereafter
Total
(in thousands)
Long-term notes payable, including current portion
$
3,032
$
1,225
$
30
$
341
$
9,662
$
–
$
14,290
Stockholder notes payable
172
172
–
–
–
–
344
Operating leases
293
303
303
143
5
–
1,047
Total
$
3,497
$
1,700
$
333
$
484
$
9,667
$
–
$
15,681
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Impact of inflation
We believe that our results of operations are not materially
impacted by moderate changes in the inflation rate. Inflation
and changing prices did not have a material impact on our
operations during fiscal 2003, 2004 or 2005. Severe increases in
inflation, however, could affect the global and
U.S. economies and could have an adverse impact on our
business, financial condition and results of operations.
Quantitative and qualitative disclosures about market risk
As of June 30, 2005, we did not participate in any
derivative financial instruments, or other financial or
commodity instruments for which fair value disclosure would be
required under SFAS No. 107, "Disclosure About
Fair Value of Financial Investments." We hold no investment
securities that would require disclosure of market risk.
We do participate in certain foreign exchange currency future
contracts programs to limit our risk and the potential impact of
currency fluctuations on our product costs. When placing a
product order, we attempt to lock in its cost by buying forward
contracts on euros coinciding with the projected payment dates
for such purchases. Individual forward contracts rarely extend
for more than six months or
exceed
€
300,000
($361,980). Total forward contracts outstanding do not exceed
€
1,250,000
($1,508,250). Depending upon the term of the contract, the cost
of these transactions can vary between approximately 50 to
100 basis points.
Changes in and disagreements with accountants on accounting
and financial disclosure
On September 28, 2004, the audit committee of our board of
directors and our entire board of directors approved the
engagement of Eisner LLP to audit our financial statements
for the fiscal years ended March 31, 2003, 2004 and 2005,
replacing Grodsky Caporrino & Kaufman, PC as our
principal accountants effective September 28, 2004. Grodsky
Caporrino & Kaufman, PC was replaced in order to engage
accountants authorized to practice before the Securities and
Exchange Commission.
Grodsky Caporrino & Kaufman's reports on our
financial statements for the years ended December 31, 2002
and 2003 did not contain an adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During those two years,
there were no disagreements with Grodsky Caporrino &
Kaufman on any matter of accounting principle or practice,
financial statement disclosure or auditing scope or procedure,
which, if not resolved to Grodsky Caporrino &
Kaufman's satisfaction, would have caused Grodsky
Caporrino & Kaufman to make reference to the subject
matter of the disagreement in connection with its report on our
consolidated financial statements for such years.
During the fiscal years ended March 31, 2003 and 2004 and
through September 28, 2004, we have not consulted with
Eisner LLP with respect to any of the matters or reportable
events set forth in Item 304(a)(2)(i) and (ii) of
Regulation S-K.
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BUSINESS
Overview
We are an emerging developer and global marketer of premium
branded spirits within four growing categories of the spirits
industry: vodka, rum, Irish whiskey and liqueurs/cordials. Since
our formation in 1998, we have invested over $60 million in
capital to develop our operating platform, acquire and grow our
branded portfolio of distinctive premium spirits and establish
U.S. and international sales and distribution. Our premium
spirits brands include, among others, Boru vodka, Gosling's
rum, Knappogue Castle Whiskey and Pallini Limoncello.
For our fiscal year ended March 31, 2005 and the three
months ended June 30, 2005, we recorded sales of
approximately 170,000 cases and 61,000 cases,
respectively, which are measured based on the industry standard
of nine-liter equivalent cases, and revenues of approximately
$12.6 million and $4.5 million, which represented
increases of 161% and 108% from revenues recorded for the prior
comparable fiscal periods. These increases reflect both organic
growth and growth from additions to our brand portfolio. We
intend to continue our current growth through further market
penetration of our brands, as well as through strategic
relationships and acquisitions of both established and emerging
spirits brands with global growth potential.
Background
Predecessor
    operations
We were formed in July 2003, as a Delaware corporation, by our
predecessor company, Great Spirits Company LLC, a Delaware
limited liability company. Great Spirits Company was formed in
February 1998 by our chief executive officer, Mark Andrews,
through one of his affiliated entities, Knappogue Corp.
Mr. Andrews originally formed Great Spirits Company for the
purpose of importing and selling the Knappogue Castle 1951 Irish
whiskey developed by his father, and he contributed 2,000
bottles of this whiskey to Great Spirits Company in connection
with its formation.
During its first year of operations, Great Spirits Company:
•
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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During 1998, Great Spirits Company also entered into a strategic
venture with Gaelic Heritage Corporation Limited, an affiliate
of Terra, pursuant to which we obtained the exclusive
distribution rights with respect to, and a 60% ownership
interest in, Celtic Crossing, a premium brand of Irish liqueur,
in the United States, Canada, Mexico, Puerto Rico and the
islands between North and South America. As part of this
strategic venture arrangement, Gaelic Heritage retained the
exclusive rights to produce and supply us with Celtic Crossing.
See "—Strategic brand-partner relationship."
Thereafter, prior to our formation in July 2003, Great Spirits
Company introduced our award winning Sea Wynde rum to the
market, entered into an exclusive distribution agreement with
The Roaring Water Bay Spirits Group Limited to distribute Boru
vodka in the United States and obtained an additional
$13.0 million of private equity financing.
Our formation and the
    acquisition of the Roaring Water Bay entities
In early 2003, Great Spirits Company entered into negotiations
with The Roaring Water Bay Spirits Group Limited to acquire the
Boru vodka brand and, in July 2003, we were formed as a holding
company to effectuate the merger of Great Spirits Company and
the Roaring Water Bay entities. This merger was accomplished on
December 1, 2003, with the simultaneous (a) merger of
Great Spirits Company into a wholly owned subsidiary established
by us for such purpose, now known as Castle Brands
(USA) Corp., and (b) acquisition by us of The Roaring
Water Bay Spirits Group Limited and its affiliated companies,
referred to by us as Roaring Water Bay, making them our wholly
owned Irish subsidiaries, now known as Castle Brands Spirits
Group Limited and Castle Brands Spirits Marketing and Sales
Company Limited. As a result of this acquisition, we acquired
ownership of Boru vodka, which is now our leading brand, and
also added the Clontarf family of Irish whiskeys and
Brady's Irish cream to our brand portfolio. During the
merger process, we raised approximately $21.7 million of
additional private equity financing.
Recent
    developments
Subsequent to our formation and acquisition of Roaring Water
Bay, we have obtained approximately $34.0 million of
additional private equity and convertible debt financing,
increased our global sales staff to 28 people, including six
regional U.S. sales managers and two foreign sales
managers, and established an extensive distribution network
throughout the United States, as well as a growing distribution
network in the European market and elsewhere. We have also
recently added two additional and significant brands to our
portfolio, as discussed below:
•
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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Our recent brand additions, together with those we acquired from
Roaring Water Bay and from our merger with Great Spirits
Company, have provided us with a strong base from which we can
continue expanding our portfolio and market presence. In
addition, we believe they have helped foster our reputation as a
strategic partner for smaller companies with established and
emerging spirits brands seeking increased brand recognition and
global expansion.
Our brands
We market our premium spirits brands in the following distilled
spirit categories: vodka, rum, Irish whiskey and
liqueurs/cordials.
Boru vodka.
Boru vodka is our leading brand and
accounted for approximately 63% and 52% of our sales for the
fiscal year ended March 31, 2005 and the three months ended
June 30, 2005. We expect Boru to also represent a
significant portion of our growth over the next several years.
Boru vodka was the first, and continues to be the largest
selling, premium vodka produced in Ireland. It was developed in
1998 and named after the first High King of Ireland, an Irish
national hero known for uniting the Irish clans and driving
foreign invaders out of Ireland in 1014 A.D. The Boru brand
is meant to reflect the strength, power and purity of spirit
associated with the image of this King Brian Boru. It is
quadruple distilled using pure spring water for smoothness and
filtered through ten feet of charcoal made from Irish oak for
increased purity. In addition, flavor extensions are and will
remain an important source of growth for us, and we have three
flavor extensions of Boru vodka: Boru Citrus, Boru Orange and
Boru Crazzberry (a cranberry/raspberry flavor fusion).
Gosling's rum.
Gosling's rums are
distilled in Bermuda where the Gosling brand has a distinguished
heritage, having been under continual ownership by the Gosling
family for over 150 years. The Gosling's rum brands
are internationally known, particularly with consumers who have
traveled to Bermuda.
Gosling's offers three distinct premium rums:
•
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.
Sea Wynde.
In 2001, we introduced Sea Wynde, a
premium rum. For centuries, some of the world's finest rums
were made in pot stills and produced in small batches. Today,
pot stills have largely been replaced by the faster and more
economically efficient column stills, which do not produce the
robust character and flavor of pot stills. Sea Wynde is
distinctive in that it is made entirely from aged,
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pure pot still rums from the Caribbean and South America. Sea
Wynde won a five-star award (the highest offered) from Spirit
Journal in 2003.
Knappogue Castle Whiskey.
We developed our
Knappogue Castle Whiskey, a single malt Irish whiskey, in 1998,
taking advantage of an opportunity to build both on the
popularity of single malt Scotch whisky and the growth in the
Irish whiskey category. Knappogue Castle Whiskey is distilled in
pot stills using malted barley and is distinctive in that it is
vintage-dated based on the year of distillation. Our Knappogue
Castle Whiskey won the "Spirit of the Year" award from
Food & Wine in 1999.
Knappogue Castle 1951.
Knappogue Castle 1951 is a
pure pot-still whiskey that was distilled in 1951 and then aged
for 36 years in sherry casks. Knappogue Castle 1951 is one
of the oldest and rarest commercially available Irish whiskeys
in the world, with only 300 bottles available for sale each
year. The name comes from a castle in Ireland, formerly owned by
Mark Edwin Andrews, the originator of the brand and the father
of Mark Andrews, our chairman, president and chief executive
officer.
Clontarf Irish whiskey.
Our family of Clontarf
Irish whiskeys currently represents a majority of our case sales
of Irish whiskey. Clontarf was launched in 2000 to meet the
growing demand for an accessible and smooth premium Irish
whiskey. Clontarf is distilled using quality grains and pure
Irish spring water and is then aged in bourbon barrels and
mellowed through Irish oak charcoal. Clontarf is available in
single malt, reserve and classic pure grain versions.
Brady's Irish cream liqueur.
We launched
Brady's Irish cream in late 2003 to capitalize on the
demand for high quality Irish creams. Brady's Irish cream
is made in small batches using single malt Irish whiskey, dairy
fresh cream and natural flavors.
Celtic Crossing liqueur.
Celtic Crossing was
developed in the mid 1990s by Gaelic Heritage, and is a unique
combination of Irish spirits, cognac and a taste of honey.
Celtic Crossing is one of the few liqueurs that are
honey-flavored, and it is enjoyed as an after dinner drink and
as a flavor enhancer in unique cocktails.
Pallini Limoncello.
Pallini Limoncello is a
premium lemon liqueur, which is served on the rocks or as an
ingredient in a wide variety of drinks, ranging from martinis to
iced tea. It is also used in cooking, particularly for pastries
and cakes. Pallini Limoncello is crafted from an authentic
family recipe created more than 100 years ago by the
Pallini family. It is made with Italy's finest Sfusato
Amalfitano lemons that are hand-selected for optimal freshness
and flavor. There are also two other flavor extensions of this
Italian liqueur: Pallini Peachcello, made with white peaches,
and Pallini Raspicello, made from a combination of raspberries
and other berries.
Industry overview
The overall beverage alcohol industry includes three major
segments: distilled spirits, wine and beer. We currently only
participate in the distilled spirits segment and, more
specifically, in the premium end of this market. Within
distilled spirits, sales of which reached nearly
$47 billion in the United States alone during 2003, there
are three primary categories: white goods (vodka, rum, gin and
tequila), whiskey and specialties (including liqueurs and
cordials). In 2004, these three categories, excluding what are
referred to in the industry as local traditional liquors such as
unbranded Chinese spirits and Indian arracki, represented
approximately 936 million global case sales, of which
approximately 161.7 million case sales were made in the
United States. White goods are the largest category within the
distilled spirits market, representing 53% of the foregoing
global distilled spirits sales made in 2004, and vodka is the
largest sub-category of white goods, representing approximately
34% of such global distilled spirits sales made in 2004. Our two
leading brands, Boru vodka and Gosling's rum, are emerging
products within the white spirits category. We expect that each
of the premium spirits segments in which we compete will
continue to demonstrate favorable growth in the foreseeable
future, particularly as compared to the overall distilled
spirits market.
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We believe the following are key industry trends:
•
increasing consumer preference for liquor and cocktails across
    various age groups and demographics, as compared to wine and
    beer;
•
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.
Within the United States, our products are included in the
imported segments of their distilled spirits categories, as all
of our products are produced outside of the United States.
Within the imported segments, the vast majority of the brands
are, like ours, premium brands. As the following case sales
tables indicate, there is significant historical and projected
growth in the imported portions of the distilled spirits
categories in which our products compete, and growth in these
imported segments is expected to outpace that of their overall
categories over the next five years.
U.S. Overall Distilled Spirits Consumption
Nine-liter case sales (in millions, except percentages)
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%
Source: IMPACT Database Review and Forecast.
The U.S. consumption of distilled spirits reached
161.7 million cases in 2004, representing a 14.3% growth
over the preceding five-year period, and case sales are expected
to reach 183.9 million by 2010, reflecting a 10.8% growth
over the next five years. Within distilled spirits, vodka is the
largest category with approximately 44.8 million cases sold
in 2004 and is expected to be the highest growth category with
an 18.3% growth rate over the next five years. Rum and
liqueurs/cordials are also expected to experience double-digit
growth with five-year growth estimates of 10.8% and 15.6%,
respectively.
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U.S. Imported Distilled Spirits Consumption
Nine-liter case sales (in millions, except percentages)
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%
Source: IMPACT Database Review and Forecast.
As the foregoing tables indicate, the imported segments of the
U.S. distilled spirits market categories in which we
compete together represent a significantly greater historical
and projected growth than that of the U.S. distilled
spirits market as a whole. The U.S. consumption of
distilled spirits in the imported segments in which we compete
are estimated to have reached 25.8 million cases in 2004,
representing a 59.3% growth over the proceeding five-year
period, as compared to a 14.3% growth over such period for
U.S. distilled spirits as a whole. In addition, case sales
within our imported segments are expected to reach
34.7 million by 2010, reflecting a 25.3% growth over the
next five years, as compared to a five year projected growth of
10.8% for U.S. distilled spirits as a whole. In addition,
the individual segments in which our premium brands compete,
i.e., imported vodka, imported rum, imported liqueurs/cordials
and Irish whiskey, demonstrated growth of 81.2%, 64.3%, 38.2%
and 66.7%, respectively, over the last five years and each such
segment is expected to achieve sizable additional growth over
the next five years, particularly imported vodka with a
projected 29.6% five-year growth rate. The growth in vodka is
attributable to its overall popularity, the recent trend in
flavor extensions and flexibility with different mixers. Rum
growth is also correlated to its mixability and new flavor
introductions. Liqueurs and cordials are increasingly popular
due to new innovative flavors tailored to individual taste
preferences, and Irish whiskey is one of the smaller yet faster
growing distilled spirits categories.
With our diverse portfolio of premium branded spirits and other
competitive strengths and our long-term strategy we believe that
we are well positioned to take advantage of recent consumer
trends in favor of high-end branded premium spirits and the
continuing growth projected for the premium segments of the
distilled spirits industry in which we have chosen to compete.
Our competitive strengths
We believe that our competitive strengths include the following:
•
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;
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•
our extensive and established U.S. distribution
    network and growing international distribution network in Europe
    and elsewhere.
We currently have distribution
    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, president 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 executive vice 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.
Our growth strategy
Our objective is to continue building a distinctive portfolio of
global premium spirits brands, with a primary focus on
increasing both our total and individual brand case sales. To
achieve this, we intend to continue:
•
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
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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;
•
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.
Production and supply
There are several steps in the production and supply process for
spirits products. First, all of our products are distilled. This
is a multi-stage process that converts basic ingredients, such
as grain or sugar cane, into alcohol. Next, the alcohol is
processed and/or aged in various ways depending on the
requirements of the specific brand. In the case of our vodka,
this processing is designed to remove all other chemicals to the
maximum extent possible, so that the resulting liquid will be
odorless and colorless, and have a smooth quality with minimal
harshness. Achieving a high level of purity is relatively
complex and involves a series of distillations and filtration
processes.
In the case of our flavored vodkas and all of our other spirits
brands, rather than removing flavor, various complex flavor
profiles are achieved through one or more of the following
techniques: infusion of fruit, addition of various flavoring
substances, and, in the case of our rums and whiskeys, aging of
the brands in various types of casks for extended periods of
time and the blending of several rums or whiskeys to achieve a
unique flavor profile for each brand. After the distillation,
purification and flavoring processes are completed, the various
liquids are bottled. This involves several important stages,
including bottle and label design and procurement, filling of
the bottles and packaging the bottles in various configurations
for shipment.
We do not have significant investment in distillation, bottling
or other production facilities or equipment. Instead, we have
entered into relationships with several companies to provide
those services to us for our various brands. We feel that these
types of arrangements are beneficial in that we do not have a
significant amount of capital committed to fixed assets and we
have the flexibility to meet
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growing sales levels by dealing with companies whose capacity
significantly exceeds our current needs. These relationships
vary on a brand-by-brand basis as discussed below.
Boru vodka
We have a supply agreement with Carbery Milk Products Limited, a
member of the Carbery Group, a large distiller and food producer
based in Ballineen, Ireland, to provide us with the distilled
alcohol used in our Boru vodka. This supply agreement with
Carbery was originally entered into by Roaring Water Bay in 1998
and became ours in 2003, when we acquired Roaring Water Bay and,
with it, our Boru vodka brand. The supply agreement provides for
Carbery to produce natural spirit for us with specified levels
of alcohol content pursuant to specifications set forth in the
agreement and at specified prices through its expiration in
December 2008, in quantities to be designated by us annually. We
believe that Carbery has more than enough distilling capacity to
meet our needs for Boru vodka for the foreseeable future.
Carbery also produces the flavoring ingredients used in the Boru
vodka flavor extensions and in our Brady's Irish cream.
From Carbery, the quadruple distilled alcohol is delivered by
them to the bottling premises at Terra Limited in Baileyboro,
Ireland, where pursuant to our bottling and services agreement
with Terra it is filtered in several proprietary ways, pure
water is added to achieve the desired proof, and, in the case of
the citrus, orange and crazzberry versions of Boru vodka,
flavorings (obtained from Carbery) are added. Each of our Boru
vodka products is then bottled in various sized bottles. We
believe that Terra, which also acts as bottler for all of our
Irish whiskeys and as producer and bottler of our Brady's
Irish cream (and as bottler for Celtic Crossing which is
supplied to us by one of Terra's affiliates), has
sufficient bottling capacity to meet our current needs, and its
facility can be expanded to meet future supply needs, should
this be required.
Pursuant to our bottling and services agreement with Terra,
which extends through February 28, 2009, Terra provides
intake, storage, sampling, testing, filtering, filling, capping
and labeling of bottles, case packing, warehousing and loading
and inventory control for our Boru vodka brands and our
Knappogue Castle and Clontarf Irish whiskeys at prices that are
adjusted annually by mutual agreement based on changes in raw
materials and price indexes for consumer price index increases
up to 3 1/2%. This agreement also provides for maintenance
of product specifications and minimum processing procedures,
including compliance with applicable food and alcohol
regulations and maintenance, storage and stock control of all
raw products and finished products delivered to Terra. All
alcohol is held on the premises by Terra under its customs and
excise bond. Terra has also agreed in the supply agreement not
to engage in any business in Ireland which competes either
directly or indirectly with our business as it relates to the
development, manufacture or supply of vodka or whiskey.
Gosling's
    rums
The Gosling's rums have been produced by Gosling's
Brothers Limited in Hamilton, Bermuda for approximately
150 years and, pursuant to our distribution arrangements
with the Goslings, they have retained the right to act as the
sole supplier to Gosling-Castle Partners Inc. with respect to
our Gosling's rum requirements. They source their rums in
the Caribbean and transport them to Bermuda where they are
blended according to proprietary recipes. The rums are then sent
to the Heaven Hill plant in Bardstown, Kentucky where they are
bottled, packaged, stored and shipped to our various
distributors. Gosling's Brothers is in the process of
increasing its blending and storage facilities in Bermuda to
accommodate our supply needs for the foreseeable future. Heaven
Hill has one of the largest bottling facilities in the United
States with ample capacity to meet our projected supply needs.
See "— Strategic brand–partner
relationships."
Knappogue Castle and
    Clontarf Irish Whiskeys
In 2005, we entered into a long-term supply agreement with Irish
Distillers, a subsidiary of Pernod Ricard, pursuant to which it
has agreed to supply us with the aged single malt and grain
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whiskeys used in our Knappogue Castle Whiskey and a Knappogue
Castle Whiskey blend we may produce in the future and all three
of our Clontarf Irish whiskey products. The supply agreement
provides for Irish Distillers to meet our running ten-year
estimate of supply needs for these products, each of which is
produced to a flavor profile prescribed by us. At the beginning
of each year of the agreement, we must nominate our specific
supply needs for each product for that year, which amounts we
are then obligated to purchase over the course of that year.
These amounts may not exceed the annual amounts set forth in the
running ten-year estimate unless approved by Irish Distillers.
The agreement provides for fixed prices for the whiskeys used in
each product, with escalations based on certain cost increases.
The whiskeys for the four products are then sent to Terra
Limited where they are bottled in bottles designed by us and
packaged for shipment.
Pallini
    Limoncello
Pallini Limoncello is produced by I.L.A.R. S.p.A., an Italian
company based in Rome and owned since 1875 by the Pallini
family. The Pallinis make their Limoncello using Sfusato
Amalfitano lemons in a proprietary infusion process. Once made,
the Limoncello is then bottled in their plant in Rome and
shipped to us pursuant to our long-term exclusive
U.S. marketing and distribution agreement. In addition to
Pallini Limoncello, I.L.A.R. produces Pallini Raspicello, using
a combination of raspberries and other berries and Pallini
Peachcello, using white peaches, and we are the exclusive
U.S. importer for both of these brands as well. We believe
that I.L.A.R. has adequate facilities in Rome to produce and
bottle sufficient Limoncello, Raspicello and Peachcello to meet
our foreseeable needs. See "— Strategic
brand-partner relationships."
Brady's Irish
    cream
Brady's Irish cream is produced for us by Terra. Fresh
cream is combined with Irish whiskey, grain neutral spirits and
various flavorings procured from the Carbery Group, to our
specifications and then bottled by Terra in bottles designed for
us. We believe that Terra has the capacity to meet our
foreseeable supply needs for this brand.
Celtic Crossing
    liqueur
We acquired a 60% ownership interest in, and distribution rights
to, the Celtic Crossing brand of Irish liqueur in the United
States, Canada, Mexico, Puerto Rico and the islands between
North and South America, from Gaelic Heritage Corporation
Limited, an affiliate of Terra. In connection with these
arrangements, Gaelic Heritage retained the right to act as the
sole supplier to us of Celtic Crossing. Gaelic Heritage mixes
the ingredients comprising Celtic Crossing using a proprietary
formula and then Terra bottles it for them in bottles designed
for us. We believe that the necessary ingredients are available
to Gaelic Heritage in sufficient supply and that Terra's
bottling capacity is currently adequate to meet our projected
supply needs. See "— Strategic brand-partner
relationships."
Sea Wynde rum
With the assistance of a master blender, we source several aged
rums from Jamaica and Guyana for our Sea Wynde rum and then send
them to a bottling facility near Edinburgh, Scotland where they
are married together and bottled for us in bottles designed by
us. We are in the process of reevaluating our sourcing,
selection and bottling arrangements to provide for increasing
supplies of Sea Wynde rum on a cost effective basis.
Distribution network
We believe that one of our primary strengths is the distribution
network that we have developed with our sales team and our
independent distributors and brokers. We currently have
distribution and brokerage relationships with third-party
distributors in all 50 states in the United States, as well
as material distribution arrangements in approximately six other
countries. We believe that our distribution network is similar
to that of our significantly larger competitors, providing a key
competitive advantage versus our competitors of similar size.
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U.S. distribution
Background.
Importers of distilled spirits in the
United States must sell their products through a three-tier
distribution system. Typically, an imported brand is first sold
to a U.S. importer, who then sells it to a network of
distributors, or wholesalers, covering the Unites States, in
either "open" states or "control" states. In
the 32 open states, the distributors are generally large,
privately held companies. In the 18 control states, the states
themselves function as the distributor, and suppliers such as us
are regulated by these states. The distributors and wholesalers
in turn sell to the individual liquor retailers, such as liquor
stores, restaurants, bars, supermarkets and other outlets in the
states in which they are licensed to sell beverage alcohol. In
larger states such as New York, more than one distributor may
handle a brand in separate geographical areas. In control
states, where liquor sales are controlled by the state
governments, importers must sell their products directly to the
state liquor authorities, which also act as the distributors and
either maintain control over the retail outlets or license the
retail sales function to private companies, while maintaining
strict control over pricing and profit.
The U.S. spirits industry has undergone dramatic
consolidation over the last ten years and the number of
companies and importers has significantly declined due to merger
and acquisition activity. There are currently six major spirits
companies, each of which own and operate their own importing
business. All companies, including these large companies, are
required by law to sell their products through wholesale
distributors in the United States, underscoring the importance
of that level of the distribution chain. The major companies are
increasingly exerting significant influence over the regional
distributors and as a result, it has become more difficult for
smaller companies to get their products recognized by the
distributors. Therefore, with the establishment of our
distribution network in all 50 states, we believe we have
overcome a significant barrier to entry in the U.S. spirits
business and enhanced our attractiveness as a strategic partner
for smaller companies lacking comparable distribution.
For the fiscal year ended March 31, 2005 and the three
months ended June 30, 2005, our U.S. sales represented
approximately 53% and 63%, respectively, of our revenues, and we
expect them to grow as a percentage of our total sales in the
future. See Note 21 of Notes to Consolidated Financial
Statements.
Importation.
While we own most of our brands or,
by contract, have the exclusive right to act as
U.S. importer of the brands of our strategic partners, we
do not currently act as our own importer in the United States.
We currently hold the federal importer and wholesaler license
required by the Alcohol and Tobacco Tax and Trade Bureau, a
division of the U.S. Department of the Treasury, but we do
not yet have the state licenses necessary to sell our products
to the distributors in the individual states. Instead, we use
the services of a licensed importer to act as importer of record
on our behalf in the United States, both with respect to our
proprietary brands and those of our strategic partners.
In 1998, we engaged MHW Ltd., a New York-based nationally
recognized and licensed importer, to coordinate the importing
and industry compliance required for the sales of our products
across the United States. Through the utilization of MHW's
national expertise and licenses, our inventory is strategically
maintained in one of the largest bonded warehouses on both
coasts (Western Carriers and Western Wine Services) and shipped
nationally by an extensive network of licensed and bonded
carriers. Pursuant to an agreement established on April 15,
1998, as amended on December 1, 2004, MHW also provides us
with certain logistical services as well as accounting,
inventory, insurance and disbursement services for our brands.
In addition, MHW provides an online tracking software, which
provides daily reports on sales of our products to our
distributors, receivables, inventory and cash receipts.
Under the terms of our agreement with MHW, which extends until
March 31, 2006, we pay MHW a monthly service fee of $4,900,
plus $1.00 per case on all cases sold during the month.
Until recently, it was much more cost effective for us to use
MHW as our U.S. importer and to rely on its state licenses
rather than expend the resources necessary to set up the
required licensing
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infrastructure internally. At this stage of our growth, however,
our revenue-based fees to MHW are reaching the point where it
begins to be more economical for us to assume the role of
importer ourselves. While we have commenced this process and
will begin to bring a number of the services provided by MHW
in-house during the next 12 months, until we have obtained
the requisite licenses in a majority of the states, a process
that could take as long as a year, we will continue to rely on
MHW to perform the importing function for us.
Wholesalers and distributors.
In the United
States, we are required by law to use state licensed
distributors or, in the control states, state-owned agencies
performing this function, to sell our brands to the various
retail outlets. As a result, we are dependent on them not only
for sales but also for product placement and retail store
penetration. We have no distribution agreements or minimum sales
requirements with any of our distributors and they are under no
obligation to place our products or market our brands. In
addition, all of them also distribute the products and brands of
competitors of ours. As a result, the fostering and maintaining
of our relationships with our distributors is of paramount
importance to us. Through our internal sales team, we have
established relationships for our brands with wholesale
distributors in each state, and our products are currently sold
in the United States by approximately 80 wholesale distributors,
as well as by various state beverage alcohol control agencies.
International
    distribution
Unlike the United States, the majority of the other countries in
which we sell our brands allow for sales to be made directly
from the brand owner to the various retail establishments,
including liquor stores, chain stores, restaurants and pubs,
without requiring that sales go through an importer or through a
distributor or wholesaler tier. In our international markets, we
do not use the services of an importer, although we use Terra
Limited to handle the billing, inventory and shipping for us
with respect to our non-U.S. markets, similar to that
aspect of our arrangement with MHW in the United States. We do,
however, rely primarily on established spirits distributors and
wholesalers in most of our non-U.S. markets in much the
same way as we do in the United States.
As in the United States, the spirits industry has undergone
consolidation internationally, with considerable realignment of
brands and brand ownership. The number of major spirits
companies internationally has been reduced significantly due to
mergers and brand ownership consolidation. While there are still
a substantial number of companies owning one or more brands,
most business is now done by six major companies each of whom
owns and operates its own distribution company in the major
international markets. These captive distribution companies
focus primarily on the brands of the companies that own them.
Even though we do not utilize the direct route to market in our
international operations, we do not believe that we are at a
significant disadvantage, because typically the local
wholesalers have significant and established relationships with
the retail accounts and are able to provide extensive customer
service, in store merchandising and on premise promotions. In
addition, even though we must compensate our wholesalers and
distributors in each market in which we sell our brands, we are,
as a result of using these distributors, still able to benefit
from substantially lower infrastructure costs and centralized
billing and collection.
Our primary international markets are the Republic of Ireland,
the United Kingdom, Germany, France, Italy and Canada. In
addition, we have sales in a number of other countries in
Continental Europe and the Caribbean. For the fiscal year ended
March 31, 2005 and the three months ended June 30,
2005, our non-U.S. sales represented 47% and 37%,
respectively, of our revenues. See Note 21 of Notes to
Consolidated Financial Statements.
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Our sales team
While we currently expect more rapid growth in the United
States, international markets hold considerable potential and
are an important part of our global strategy. We have begun
searching for a senior executive to oversee all of our
international operations. In the meantime, we are reevaluating
our international strategy on a market-by-market basis to
strengthen our distributor relationships, optimize our sales
team and effectively focus our financial resources.
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.
Initially, in the United States, we engaged regional
representatives, known as brokers, on a part-time basis to work
with our distributors in core U.S. markets. These brokers
worked as if they were our internal sales personnel, but were
paid a per-case commission instead of a salary and related
benefits. Except in the control states where brokers continue to
provide valuable liaison services with state liquor commissions,
we have replaced these part-time representatives with highly
experienced full-time regional managers. Our current
U.S. sales regions and their respective managers are as
follows:
•
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.
Similar to our U.S. sales structure, working under our two
international sales managers, we have area sales managers for
the United Kingdom, Ireland, Northern Ireland and Continental
Europe.
Our sales personnel are engaged in the day to day management of
our distributors, which includes setting quotas, coordinating
promotional plans for our brands, maintaining adequate levels of
stock, brand education and training and sales calls with
distributor personnel. In addition to distributor management,
our sales team also maintains relationships with key retail
customers through independent sales calls. They also schedule
promotional events, create local brand promotion plans, host our
in-store tastings in the jurisdictions where such promotions are
legal and provide waitstaff and bartender training and education
with respect to our brands.
Advertising, marketing and promotion
In order to build our brands, we must effectively communicate
with three distinct audiences: our distributors, the retail
trade and the end consumer. We place significant emphasis on
advertising, marketing and promotional activities to establish
and reinforce the image of our brands, with the objective of
building substantial brand value. We also make a substantial
investment in these activities, significantly more on a per case
basis than many of our competitors who are seeking to maintain,
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rather than aggressively grow, their case sales. We are
committed to continuing aggressive advertising and promotion
activities to build our brands and their value and believe that
our execution of disciplined and strategic branding and
marketing campaigns will continue to drive our sales growth.
We employ full-time, in-house marketing, sales and customer
service personnel who work together with leading third party
design and advertising firms to maintain a high degree of focus
on each of our product categories and build brand awareness
through innovative marketing activities. We use a range of
marketing strategies and tactics to build brand equity and
increase sales, including market research, consumer and trade
advertising, price promotions, point-of-sale materials, event
sponsorship, in-store and on-premise promotions and public
relations, as well as a variety of other traditional and
non-traditional marketing techniques to support the sales of all
of our brands.
With respect to our leading brand, Boru vodka, we engage in a
number of promotions and incentive programs with our
distributors, advertise our brands in prominent trade
publications, and in 2004, initiated a major consumer marketing
campaign from Washington D.C. to Boston, with particular
emphasis on the New York Metro and Boston markets. In connection
with this marketing campaign, we engaged Fathom Communications
Inc., an innovative firm whose principals have experience with
large advertising agencies, to work with us. The campaign
positioned Boru as a clear-thinking, witty brand from Ireland
and is centered on a series of "Boruisms," which
highlight the clarity of the product and the clarity of its
brand message. These appeared on phone kiosks and bus stops in
New York City and Boston, as well as in other high impact
locations, including a major presence in the New York City
subway. The campaign also utilized radio advertisements,
primarily on WEEI, the largest sports radio in Boston.
We are now also putting substantial emphasis on consumer
advertising for Gosling's rum and, through Gosling-Castle
Partners, have engaged Kelly & Co., an innovative firm
in Boston which specializes in high-end consumer goods, to
assist us in this project. Our Gosling's campaign is
utilizing substantial billboard coverage along the east coast of
the United States and selected regional print space in major
national publications such as Time, Newsweek and Food &
Wine, and it communicates that this famous Bermuda brand is now
becoming available in the United States.
In addition to traditional advertising, we also place heavy
emphasis on four other marketing methods to support our brands:
public relations, events, tastings and marketing to celebrities.
We have an extensive public relations effort in the United
States, which has helped gain important editorial coverage for
our brands. Event sponsorship is an economical way for us to
have our brands tasted by influential consumers, and we actively
contribute product to trend setting events where our brand has
exclusivity in the brand category. We also conduct hundreds of
in-store and on-premise promotions each year. In addition, we
provide our products to celebrities appearing on various
television programs.
We support our marketing efforts for our brands with a wide
assortment of point-of-sale materials such as mirrors, banners,
glassware, table tents, shelf talkers, case cards, napkins and
apparel. The combination of trade and consumer programs,
supported by attractive point-of-sale materials, also
establishes greater credibility for us with our distributors and
retailers.
We also place a significant emphasis on our bottle design,
labeling and packaging to establish and reinforce the image of
our brands. For instance, we currently offer our Boru vodka and
two of its flavor extensions, as well as our three Clontarf
Irish whiskeys, in the award-winning Trinity bottle, which
consists of three stacked 200 ml. bottles. We are also in the
process of significantly redesigning and upgrading the quality
of our standard Boru vodka bottle and have engaged Claessens
International, a widely respect design firm based in London, to
assist us with this project. We believe that this new bottle
will be an important contributor to the further building of the
Boru vodka brand. We intend to continue trade advertising and
promotional events for Boru vodka and to resume more substantial
consumer advertising once this new bottle is on the market.
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While the majority of our advertising, marketing and promotional
budget is focused on the U.S. market, we are also active with
certain of the same types of activities in Ireland, the United
Kingdom, Germany and a growing number of other international
markets.
Strategic brand-partner relationships
A key component of our growth strategy and one of our
competitive strengths is our ability to forge strategic
relationships with owners of both emerging and established
spirits brands seeking opportunities to increase their sales
beyond their home markets and achieve global growth. Our
original relationship with the Boru vodka brand was as its
exclusive U.S. distributor. To date, we have also established
strategic relationships with respect to Gosling's rum,
Pallini Limoncello and Celtic Crossing, all of which
relationships are described below, and we will endeavor to
continue expanding our brand portfolio through similar such
arrangements in the future.
Gaelic Heritage Corporation
    Limited/Celtic Crossing
In March 1998, we entered into an exclusive national
distribution agreement with Gaelic Heritage Corporation Limited,
an affiliate of Terra Limited, one of our suppliers, which was
subsequently amended in April 2001, pursuant to which we
acquired from Gaelic a 60% ownership interest, and our importer,
MHW, acquired a 10% ownership interest, in the Celtic Crossing
brand in the United States, Canada, Mexico, Puerto Rico and the
islands between North and South America. We also have the right
to acquire 70% of the ownership of the Celtic Crossing brand in
the remainder of the world. We also acquired the exclusive right
to distribute Celtic Crossing on a world-wide basis. Under the
terms of the agreement with Gaelic, as amended, we have the
right to purchase from Gaelic, based upon our forecasts, cases
of Celtic Crossing at annually agreed costs and a royalty
payment per case sold at various rates depending on the
territory and type of case sold. During the term of the
agreement, without the prior written consent of Gaelic, we may
not distribute any other Irish liqueur/cordial unless it is
bottled in Gaelic's (Terra's) facilities. Pursuant to
the terms of the agreement, Gaelic provides us with
€
6.3 million
($7.6 million) of product liability insurance. The agreement may
be terminated, among other things, upon notification by either
party that the other party has materially breached the agreement
and such breach is not cured within 60 days of the date
such notice is given.
I.L.A.R. S.p.A./Pallini
    Limoncello
In August 2004, we entered into an exclusive marketing and
distribution 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
with respect to its Pallini Limoncello and a right of first
refusal on related brand extensions.
During the period through December 31, 2007, we have the
right to purchase Limoncello at a stipulated price subject to
one adjustment in 2006 or 2007 to reflect the inflation rate in
the Italian economy and subject to further adjustment for raw
material increases of 5% or more during any quarter to the
extent the increase is above the rate of inflation and only for
the period the increase is maintained. After 2007, I.L.A.R. has
the discretion to raise prices as long as the price increases do
not exceed those of major competitors for comparable products.
I.L.A.R. is required to maintain certain product standards, and
we have input into adjustments of the product and packaging. We
are required to prepare a preliminary annual strategy plan for
advertising and distribution for review and are required to make
certain advertising, marketing and promotional expenditures
based on volume. The initial term of the agreement expires on
December 31, 2009 and is automatically renewed for either
three or five years, based on case sales in 2009. I.L.A.R.
indemnifies us in the United States for claims arising out of
compliance with U.S. laws or regulations or relating to the
quality or fitness of products and maintains $5 million of
insurance upon which we are named an additional insured. We
indemnify I.L.A.R. for claims arising out of claims relating to
the marketing, promotion, sale or distribution of the
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products and maintain $5 million of standard product
liability insurance upon which I.L.A.R. is the named insured.
Additional agreements are pending regarding I.L.A.R.'s
distribution of our products.
Gosling-Castle Partners
    Inc./Gosling's rums
Effective as of January 2005, we entered into a national
distribution agreement with Gosling's Export (Bermuda)
Limited, referred to as Gosling's Export, pursuant to which
we obtained the exclusive right to distribute the Gosling's
rum products, which have been produced by the Gosling family in
Bermuda for over 150 years, and Gosling's rum-related
gourmet food products in the United States. In February 2005, we
expanded this relationship by purchasing a 60% controlling
interest in a strategic export venture, now named Gosling-Castle
Partners Inc., with the Gosling family. Gosling-Castle Partners
was formed to enter into an export agreement with Gosling's
Export that gives Gosling-Castle Partners the exclusive right to
distribute Gosling's rum and related products on a world
wide basis (other than in Bermuda) and assigns to Gosling-Castle
Partners all of Gosling's Export's interest in our
January 2005 U.S. distribution agreement with them. In
exchange for the global distribution rights under the export
agreement, Gosling-Castle Partners issued a note to
Gosling's Export in the principal amount of
$2.5 million, payable in four equal installments of
$625,000 bi-annually through October 1, 2006. The export
agreement has an initial term expiring in April 2020, subject to
a 15 year extension if certain case sale targets are met.
Under the terms of the export agreement, which commenced in
April 2005, Gosling-Castle Partners is generally entitled to a
stipulated share of the proceeds from the sale, if ever, of the
ownership of any of the Gosling's brands to a third-party,
through a sale of the stock of Gosling's Export or its
parent, with the size of such share depending upon the number of
case sales made during the twelve months preceding the sale. In
addition, prior to selling the ownership of any of their brands
that are subject to these agreements, the Goslings family must
first offer such brand to Gosling-Castle Partners and then to
us. To obtain our interest in Gosling-Castle Partners, we
contributed $5.0 million to its capital, which amount
consisted of $100,000 in cash and a promissory note in the
principal amount of $4.9 million payable bi-annually
through April 1, 2007. Pursuant to our arrangement with the
Goslings, they have retained the right to act, through
Gosling's Brothers Limited, as the sole supplier to
Gosling-Castle Partners with respect to our Gosling's rum
requirements.
Intellectual property
Trademarks are an important aspect of our business. Our brands
are protected by trademark registrations or are the subject of
pending applications for trademark registration in the United
States, European Community and other countries where we
currently distribute the brand or have plans to distribute the
brand. In some cases, the trademarks are registered in the names
of our various subsidiaries and related companies. Generally,
the term of a trademark registration varies from country to
country, and, in the United States, trademarks expire and need
to be renewed every ten years. We will continue to register our
trademarks in additional markets as we expand our distribution
territories.
We have entered into distribution agreements for brands owned by
third parties, such as Pallini and the Gosling's rums. The
Pallini and Gosling's rum brands are registered by their
respective owners and we have the exclusive right to distribute
the Gosling's rums on a worldwide basis (other than in
Bermuda) and the Pallini brands in the United States. See
"—Strategic brand-partner relationships."
Our unique "trinity" bottle is the subject of a
U.S. Design Patent owned by The Roaring Water Bay (Research
& Development Company) Limited. In December 2003, we entered
into a license agreement with Roaring Water Bay
Research & Development) Company Limited whereby we
obtained an exclusive license to use the patent for a five-year
term ending in December 2008. We pay a royalty equal to 8% of
the net invoice price of all products sold using the trinity
bottle or otherwise disposed of by us, subject to a maximum of
€
30,000 ($36,198)
per year. The agreement also includes the right to acquire the
patent for the Trinity bottle
for
€
90,000
($108,594), which we intend to exercise prior to the
consummation of this offering.
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Information systems
We employ Microsoft Great Plains as our financial reporting
system worldwide. This system is hosted by a third party in
Washington, D.C. and is accessible remotely by our
personnel globally via secured Internet connection. We maintain
local area networks, referred to as LANS, in both our Dublin and
New York offices. These LANS support email communication and
Internet connectivity for these offices and, in addition,
support such features as automatic data back-up and recovery in
the event of a hardware failure at a local terminal. These LANS
are maintained by professional third-party service providers at
each location.
We have also entered into a 36-month contract with Dimensional
Insight, Inc. for its InterReport service. Among other things,
this service provides business intelligence regarding sales of
our products held by our distributors, inventory levels at our
distributors and shipments of our products from distributors to
specific retailers, as well as reporting formats that compare
this information against comparable prior year periods. We
consider this to be a valuable tool for our sales force and
financial planners as it provides the feedback required to
improve the accuracy of sales forecasting and inventory
management, and the effectiveness of our sales and marketing
promotions.
Competition
Over the past ten years, the U.S. distilled spirits
industry has undergone dramatic consolidation and realignment of
brands and brand ownership. The number of major spirits
importers in the United States has significantly declined due to
mergers and brand ownership consolidation. While historically
there were a substantial number of companies owning one or more
major brands, today there are six major companies: Diageo,
Pernod Ricard, Bacardi, Brown-Forman, Fortune Brands and
Constellation Brands. These companies are the leading importers
of spirits to the U.S. market, but often are not positioned
well to partner with small to mid-size brands or in situations
in which family members prefer to remain involved longer term,
thereby creating an opportunity for us.
We believe that we compete on the basis of quality, price, brand
recognition and distribution strength. Our premium brands
compete with other alcoholic and nonalcoholic beverages for
consumer purchases, as well as for shelf space in retail stores,
restaurant presence and wholesaler attention. In addition to the
six major companies discussed above, we compete with numerous
multinational producers and distributors of beverage alcohol
products, many of which have greater resources than we do.
Seasonality
Our industry is subject to seasonality with peak sales in each
major category generally occurring in the fourth calendar
quarter, which is our third fiscal quarter. See "Risk
Factors — Our quarterly operating results have
fluctuated in the past and may fluctuate significantly in the
future rendering quarter-to-quarter comparisons unreliable as
indicators of performance."
Government regulation
The Alcohol and Tobacco Tax and Trade Bureau of the United
States Treasury Department regulates the spirits industry with
respect to production, blending, bottling, sales and advertising
and transportation of alcohol products. Also, each state
regulates its advertising, promotion, transportation, sale and
distribution of alcohol products within its jurisdiction. In
countries other than the United States in which we operate, we
are subject to similar regulations. We are also required to
conduct business in the United States only with holders of
licenses to import, warehouse, transport, distribute and sell
spirits.
In the 18 U.S. control states, the state liquor commissions act
in place of distributors and decide which products are to be
purchased and offered for sale in their respective states.
Products are
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selected for purchase and sale through listing procedures which
are generally made available to new products only at
periodically scheduled listing interviews. Products not selected
for listings can only be purchased by consumers through special
orders, if at all.
The distribution of alcohol-based beverages is also subject to
extensive taxation both in the United States and
internationally, and in the United States, at both the federal
and state level.
We believe that we are in material compliance with all
applicable federal, state and other regulations. However, we
operate in a highly regulated industry which may be subject to
more stringent interpretations of existing regulations. Future
costs of compliance with changes in regulations could be
significant.
Employees
As of September 27, 2005, we had 49 employees, of which 28
were in sales and 21 were in management, finance, marketing and
administration. Of our employees, 33 are full time employees in
the United States and 16 are employed outside of the United
States in countries including Ireland and Great Britain.
Properties
Our executive offices are located in New York, New York, where
we lease approximately 3,800 square feet of office space
under a sublease that expires on March 30, 2008. We also
lease approximately 7,500 square feet of office space in
Dublin, Ireland under a lease that expires on February 28,
2009 and approximately 1,000 square feet of office space in
Houston, Texas under a lease that expires on March 31, 2006.
Legal proceedings
We believe that neither we nor any of our wholly owned
subsidiaries is currently subject to litigation. We may,
however, become involved in litigation from time to time
relating to claims arising in the ordinary course of our
business. These claims, even if not meritorious, could result in
the expenditure of significant financial and managerial
resources.
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MANAGEMENT
Directors and executive officers
The following table sets forth certain information regarding our
directors and executive officers as of the closing of this
offering:
Name
Age
Position
Mark Andrews
55
Chairman of the Board, President and Chief Executive Officer
Keith A. Bellinger
47
Executive Vice 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)(2)
Robert J. Flanagan
49
Director(2)(3)
Phillip Frost, M.D.
68
Director
Colm Leen
42
Director(3)
Richard C. Morrison
65
Director(1)
Frederick M. R. Smith
63
Director(2)(3)
Kevin P. Tighe
61
Director(1)
(1)
Member of the nominating and corporate governance committee
(2)
Member of the compensation committee
(3)
Member of the audit committee
Mark Andrews,
our chairman of the board, president
and chief executive officer, founded our predecessor company,
Great Spirits Company LLC, in 1998. Mr. Andrews has served
as our president, chief executive officer and chairman of the
board since December 2003. Mr. Andrews founded American
Exploration Company, a company engaged in the exploration and
production of oil and natural gas, in 1980. He oversaw that
company becoming publicly traded in 1983 and served as its
chairman and chief executive officer until its merger with Louis
Dreyfus Natural Gas Corp. in October 1997. In addition,
Mr. Andrews is a director of IVAX Corporation, a worldwide
producer and marketer of generic and proprietary drugs. He also
serves as a life trustee of The New York Presbyterian Hospital
in New York City. Mr. Andrews received a bachelor of arts
from Harvard College in 1972 and a masters of business
administration from Harvard Business School in 1975.
Keith A. Bellinger,
our executive vice president,
chief operating officer and secretary, joined us in May 2005. He
has over 18 years of experience in the spirits industry,
including eight years with Allied Domecq PLC, a company in the
business of spirits, wines and quick service restaurants. While
at Allied Domecq, Mr. Bellinger served as chief financial
officer of the U.S. Spirits Division from September 1996 to
August 2000. From September 2000 to August 2002,
Mr. Bellinger served as the general manager and executive
vice president of the ADvantage Brands division of Allied
Domecq, a division focused on emerging brands. From September
2002 to December 2004, he served as president of the Northern
Business Unit of Allied Domecq U.S., one of the largest
divisions of that company, where he oversaw all operations.
Mr. Bellinger began his career in public accounting.
Mr. Bellinger received a bachelor of business
administration from the University of Texas at Austin in 1980.
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T. Kelley Spillane,
our senior vice
president — U.S. sales, joined us in
April 1, 2000. From April 1, 2000 to December 2003,
Mr. Spillane served as vice president-sales of Great
Spirits Company, and was appointed executive vice
president — U.S. sales in December 2003. Prior to
joining us, Mr. Spillane worked at Carillon Importers
Limited, a division of Grand Metropolitan PLC. Carillon
developed and launched Absolut Vodka and Bombay Sapphire Gin. At
Carillon, Mr. Spillane served as assistant manager for its
control states and duty free divisions and was promoted to
director of special accounts, focusing on expanding sales in
national accounts. Mr. Spillane received a bachelor of
science in business administration from Ramapo College in 1985.
Matthew F. MacFarlane,
our senior vice president
and chief financial officer, joined us in December 2003. From
October 2001 to July 2003 Mr. MacFarlane served as
corporate controller of Fusion Telecommunications International,
Inc., an international communications carrier. In November 1984,
Mr. MacFarlane joined Prodigy Communications Corporation,
an internet service provider, which went public in February
1999. Mr. MacFarlane served as vice president and corporate
controller at Prodigy from April 1998 to May 2001. Prior to
Prodigy, Mr. MacFarlane worked at KPMG LLP and
PriceWaterhouseCoopers International Limited, working primarily
in the audit divisions. In addition to being a certified public
accountant, Mr. MacFarlane is a certified management
accountant and a certified internal auditor. Mr. MacFarlane
received a bachelor of science degree from Fordham University in
1975 and a masters of business degree from Pace University in
1979.
John F. Beaudette
has served as a director of our
company since January 2004. Since 1995, Mr. Beaudette has
been the president of MHW, Ltd. (formerly named Monsieur Henri
Wines Ltd.), a national alcoholic beverage importer, distributor
and service company. From 1985 to 1994, Mr. Beaudette
worked with PepsiCo Inc. and its affiliate company Monsieur
Henri Wines in the distribution of Stolichnaya Vodka and other
imported wine and spirit brands. During this period,
Mr. Beaudette held positions such as director of planning
for PepsiCo Wines & Spirits International and vice
president of finance and chief financial officer of Monsieur
Henri Wines. Mr. Beaudette currently sits on the board of
directors of The National Association of Beverage Importers Inc.
(NABI) and serves on its executive committee.
Mr. Beaudette received a bachelor of science degree in
accounting from Villanova University in 1979.
Robert J. Flanagan
has served as a director of our
company since January 2004. Since 1989, Mr. Flanagan has
served as the executive vice president of Clark Enterprises
Inc., a Bethesda, Maryland-based investment holding company and
as the manager of CNF Investments LLC, an affiliate of Clark
Enterprises Inc. CNF Investments LLC is one of our principal
stockholders. Mr. Flanagan oversees the acquisition,
management and development of new investment opportunities for
Clark and is a member of the board of directors of Martek
BioSciences Corporation. Prior to joining Clark,
Mr. Flanagan was the treasurer, secretary and member of the
board of directors of the Baltimore Orioles, Inc. and began his
career in public accounting. Certified as a public accountant in
Washington, D. C., Mr. Flanagan received a bachelor of
science in business administration from Georgetown University in
1978 and a master of science degree in taxation from the
American University School of Business in 1985.
Philip Frost, M.D.
, has served as a director
of our company since September 2005. Since 1987, Dr. Frost
has served as chairman of the board of directors and chief
executive officer of IVAX Corporation, a worldwide producer and
marketer of generic and proprietary drugs. He also served as the
president of IVAX Corporation from 1991 until 1995. He is a
member of the board of directors of IVAX Diagnostics, Inc.,
Northrop Grumman Corporation, Continucare Corporation and
Cellular Technical Services Company, Inc. He is also a director
of Ladenburg Thalmann & Co. Inc., an underwriter in
this offering and our placement agent in connection with the
sale of our Series C convertible preferred stock in 2004
and 2005. He is a member, and former chairman, of the board of
trustees of the University of Miami and a co-vice chairman of
the board of governors of the American Stock Exchange.
Dr. Frost received a bachelor of arts degree from
University of Pennsylvania in 1957 and a doctor of medicine
degree from Albert Einstein College of Medicine in 1961.
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Colm Leen
has served as a director of our company
since January 2004. Mr. Leen also serves as a director of
our subsidiaries, Castle Brands Spirits Group Limited and Castle
Brands Marketing and Sales Company Limited. Since 1995,
Mr. Leen has been the group finance director and company
secretary of the Carbery Group, a supplier to our company. The
Carbery Group is involved in the dairy, food ingredients and
beverage alcohol industries, with established markets in
Ireland, the United Kingdom, mainland Europe, the Far East and
North America. Mr. Leen has been with the Carbery Group
since 1988, initially joining it as company accountant and
subsequently assuming the role of its financial controller in
1992 and his present role of group finance director in 1995.
Mr. Leen is also the executive director of Carbery Milk
Products Limited. Prior to joining Carbery, Mr. Leen worked
with KPMG LLP from 1984 to 1988. He qualified as a chartered
accountant in 1987, became an associate of the Institute of
Chartered Accountants in Ireland in 1987 and a fellow of the
Institute in 1997. Mr. Leen received a bachelor of commerce
degree from University College Cork in 1984.
Richard C. Morrison
has served as a director of
our company since September 2005. Mr. Morrison worked at
Massachusetts Mutual Life Insurance Co. from 1964 until his
retirement in 2004. Most recently, Mr. Morrison served as
the managing director of Babson Capital Management, the
investment subsidiary of Massachusetts Mutual. Massachusetts
Mutual is a more than 5% stockholder of our company. He also
serves as a director of Reinhold Industries, Inc., Cains Foods,
L.P., Nyloncraft, Inc., Tubular Textile Machinery, Inc. and is
an advisory director of Hammond, Kennedy, Whitney and Co., Inc.
Mr. Morrison received a bachelor of arts from West Virginia
Wesleyan College in 1962 and a master of science in finance from
the University of Arizona in 1964.
Frederick M. R. Smith
has served as a director of
our company since January 2004. Mr. Smith also serves as a
director of our subsidiary, Gosling-Castle Partners Inc. Since
January 2002, Mr. Smith has been a financial consultant
through his wholly owned company, Kirkwood Lane Associates LLC.
From 1967 to January 2002, he worked at Credit Suisse First
Boston, most recently as co-head of Credit Suisse First
Boston's international private equity activities.
Mr. Smith currently acts as a consultant to Credit Suisse
First Boston. Mr. Smith, an investor in our company, joined
Credit Suisse First Boston's private equity group in 1995
after playing a senior role in Credit Suisse First Boston's
investment banking division and founding its media and telecom
group. He has over 30 years of private equity and
investment banking experience with Credit Suisse First Boston.
Mr. Smith also serves as a director of Unwired Australia,
Teleperformance Brazil and Slager Radio Hungary. Mr. Smith
received a bachelor of arts degree from Yale University in 1963
and attended Johns Hopkins' School of Advanced
International Studies in Washington, DC.
Kevin P. Tighe
has served as a director of our
company since September 2005. Since 1995, Mr. Tighe has
been a partner at, and is a founding partner of, the law firm of
Tighe Patton Armstrong Teasdale, PLLC. For over 36 years,
Mr. Tighe has represented the automobile industry and its
trade associations before the U.S. Congress and other
federal agencies. He also maintains a real estate practice at
the firm. Mr. Tighe received a bachelor of arts degree from
St. Angelm's College in 1966 and received a doctor of
jurisprudence from Catholic University School of Law in 1969.
Mr. Tighe is a member of the bar of the District of
Columbia and the U.S. Supreme Court.
Other key employees and consultants
Amelia M. Gary,
the vice president –
finance and administration of our U.S. subsidiary, Castle
Brands (USA) Corp., joined us in October 2002. From October
2002 to December 2003, Ms. Gary served as vice
president – finance of Great Spirits Company, our
predecessor company, and was appointed vice
president – finance and administration of Castle
Brands (USA) Corp. as of December 2003. Ms. Gary
oversees investor relations and human resources and is involved
in our capital raising and banking activities. From August 1995
to September 2002, Ms. Gary was with Brown Brothers
Harriman & Co., a private bank, most recently as a vice
president in the commodities finance division, specializing in
coffee, cocoa and tea. Ms. Gary earned a bachelor of arts
degree from Connecticut College in 1995.
E. Malcolm B. Gosling
has served as president
and chief executive officer of our export venture,
Gosling-Castle Partners Inc., since April 2005. Gosling-Castle
Partners is owned 60% by us,
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with the remainder owned by Mr. Gosling and Gosling's
Limited in Bermuda. In his capacity as president of our export
venture, he oversees the global exports of the Gosling's
rum brands into the United States and various other markets.
Since 2003, Mr. Gosling has served as president of Gosling
Export (Bermuda) Limited, a Bermuda based company responsible
for the production and shipping of Gosling's rum, and
serves as a director of the Bermuda holding company. Since 1989,
Mr. Gosling has also served as the vice president and
managing director of Gosling Brothers Limited, the parent
company of Gosling Export (Bermuda). Mr. Gosling has been
active with the family business for over 20 years, and
represents the seventh generation of his family to be active in
the business. Mr. Gosling received a bachelor of arts
degree from Boston College in 1985.
Thomas O'Connor,
the global procurement and
logistics manager of one of our Irish subsidiaries, Castle
Brands Spirits Group Limited, joined us in December 2003.
Mr. O'Connor served as procurement and planning
manager at Roaring Water Bay from November 2002 to December
2003. Prior to joining Roaring Water Bay, Mr. O'Connor
worked for over 20 years as the sales and production
planning manager with The Irish Glass Bottle Company, a
manufacturer of high quality containers for the food and drink
industry. Mr. O'Connor received a computer programming
diploma from Trinity College Dublin in 1983.
David Phelan
currently serves as one of our
consultants. Prior to becoming a consultant, Mr. Phelan
served as executive vice president and a director of our company
from December 2003 to October 2005. In July 1998,
Mr. Phelan co-founded Roaring Water Bay Spirits Co. Ltd.,
where he served as managing director until its merger with us.
Mr. Phelan has over 20 years of international
commercial and marketing experience in the liquor industry,
including working as a director at R&A Bailey in key
European and Asian markets, both domestic and duty free. He has
also worked on several new brand development projects, including
The Dunhill Cognac brand, which was launched in Asia by Diageo/
Grand Met, and the Baileys Whiskey brand. Mr. Phelan
received a bachelor of arts degree from Trinity College Dublin
in 1983.
Patrick Rigney
currently serves as one of our
consultants. Prior to becoming a consultant, Mr. Rigney
served as executive vice president and a director of our company
from December 2003 to March 2005. In July 1998, Mr. Rigney
co-founded Roaring Water Bay, where he served as managing
director until its merger with us. Mr. Rigney has over
20 years of international and commercial marketing
experience in the liquor industry, including working as a
director at R&A Bailey, with responsibility for the
Bailey's Irish cream brand in the Americas, Australia and
Asia. Mr. Rigney received a bachelor of commerce degree
from the University College Dublin in 1982.
Roseann Sessa,
the vice president –
marketing and public relations of our U.S. subsidiary,
Castle Brands (USA) Corp., joined us in February 1998. From
February 1998 to December 2003, Ms. Sessa served as vice
president – marketing of Great Spirits Company, our
predecessor company, and was appointed vice
president – marketing and public relations of Castle
Brands (USA) Corp. in December 2003. Ms. Sessa is
responsible for developing and implementing our marketing plans
in the United States. Prior to joining us, Ms. Sessa served
for eight years as assistant to Mr. Andrews, our chairman,
while he was the chairman of American Exploration Corporation.
From 1979 to 1990, Ms. Sessa worked at Lane Bryant, a
division of The Limited, Inc., a marketer of women's
apparel. Ms. Sessa attended the Berkley Business School in
1974.
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Board composition and committees
The amended and restated certificate of incorporation and
amended and restated bylaws allow the board of directors to set
the number of directors by resolution. Currently, our board of
directors consists of eight directors. All of our directors will
serve until the annual meeting of stockholders to be held in
2006. Our bylaws authorize our board of directors to appoint one
or more committees, each consisting of one or more directors.
Our board of directors currently has three standing committees:
an audit committee, a compensation committee, and a
nominating/corporate governance committee, the composition and
responsibilities of each of which are described below:
Nominating and corporate governance committee
The nominating and corporate governance committee is responsible
for, among other things:
•
selecting the slate of nominees of directors to be proposed for
    election by the stockholders and recommending to the board of
    directors individuals to be considered by the board of directors
    to fill vacancies;
•
developing and implementing policies regarding corporate
    governance matters and recommending any desirable changes to
    such policies to the board of directors;
•
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.
The members of our nominating and corporate governance committee
are Messrs. Morrison, Beaudette and Tighe.
Mr. Morrison serves as the chairman of this committee.
Audit committee
The audit committee is responsible for, among other things:
•
appointing, overseeing and compensating the work of the
    registered independent public accounting firm;
•
reviewing our quarterly financial statements and 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 which may impact the
    independence of the registered independent public accounting
    firm and being responsible for oversight of the independence of
    the registered independent public accounting firm;
•
reviewing and approving the audit committee report to be filed
    with the SEC;
•
reviewing with the outside auditor the adequacy and
    effectiveness of the internal controls over our financial
    reporting;
•
establishing procedures for the submission of complaints,
    including the submission by our employees of anonymous concerns
    regarding questionable accounting or auditing matters;
•
reviewing with our chief executive officer and chief financial
    officer any significant deficiencies in the design or operation
    of our internal controls and any fraud, whether or not material,
    that involves our management or other employees who have a
    significant role in our internal controls; and
•
reviewing and assessing annually the adequacy of the audit
    committee charter.
The members of our audit committee are Messrs. Flanagan,
Leen and Smith. Mr. Flanagan serves as chairman of the
committee.
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Compensation committee
The principal responsibilities of the compensation committee
are, among others:
•
reviewing and determining annually the compensation of our chief
    executive officer and other executive officers;
•
preparing an annual report on executive compensation for
    inclusion in our annual proxy statement for each annual meeting
    of stockholders in accordance with applicable SEC rules and
    regulations;
•
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 and the adequacy of the
    compensation committee charter.
The members of our compensation committee are
Messrs. Smith, Beaudette and Flanagan. Mr. Smith
serves as the chairman of this committee.
Director compensation and other information
For service on our board of directors, we annually compensate
our non-employee directors with options granted under our stock
incentive plan. At the end of each fiscal year, we grant each of
our non-employee directors options to
purchase 5,000 shares of our common stock. In
addition, we grant additional options to
purchase 1,000 shares of common stock to each
non-employee director who serves on a committee. After the
consummation of this offering, we intend to pay our non-employee
directors $10,000 per year for serving on our board in
addition to the stock options referred to above and increase the
options granted annually to directors serving on the audit
committee from 1,000 to 2,500.
We also reimburse each non-employee director for travel and
related expenses incurred in connection with attendance at board
and committee meetings. Employees who also serve as directors
receive no additional compensation for their services as a
director.
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Executive compensation
The following table sets forth the total compensation for
services in all capacities to us received by our chief executive
officer, our other executive officers whose annual salary and
bonus exceeded $100,000 during the fiscal year ended
March 31, 2005, and a current executive officer who we
believe will be one of our four most highly compensated
executive officers for the fiscal year ending March 31,
2006. We refer to these individuals as our "named executive
officers."
Summary compensation table
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, President and Chief Executive Officer
Keith Bellinger(1)
—
—
—
—
—
Executive Vice 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. 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, and he is engaged as a consultant
    to our company through March 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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Option grants
The following table sets forth certain information with respect
to stock options we granted during the fiscal year ended
March 31, 2005 to each of the named executive officers:
Option grants in last fiscal year
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
Keith Bellinger (3)
—
—
—
—
T. Kelley Spillane
5,000
1.36%
$
8.00
1/27/15
David Phelan
—
—
—
—
Matthew F. MacFarlane
10,000
2.72%
$
8.00
1/27/15
(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
    $           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. On that date, 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.
Option values and holdings
The following table describes, for each of the named executive
officers, the exercisable and unexercisable options held by them
as of March 31, 2005. The "Value of unexercised
in-the-money options at fiscal year-end" shown in the table
represents an amount equal to the difference between the
midpoint of the proposed range of the initial public offering
price of
$            per
share and the option exercise price multiplied by the number of
unexercised in-the-money options.
Fiscal year-end option values
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
Keith Bellinger (1)
—
—
—
—
T. Kelley Spillane
—
—
15,000
50,000
David Phelan
—
—
8,000
32,000
Matthew F. MacFarlane
—
—
12,500
47,500
(1)
Mr. Bellinger became our chief operating officer on
    May 2, 2005. On that date, 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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Agreements with named executive officers
Agreement with Mark Andrews.
On December 1,
2003, we entered into a five-year employment agreement with Mark
Andrews, our chairman of the board, president and chief
executive officer. The employment agreement, as amended
effective as of May 2005, provides for a current annual
base salary of $275,000, with increases based on periodic
reviews in the sole discretion of the compensation committee of
our board of directors.
The employment agreement prohibits Mr. Andrews from
competing with us during the term of the employment agreement
and for 12 months thereafter; provided that we continue to
pay Mr. Andrews' salary during that period. The
employment agreement also prohibits Mr. Andrews from, for
the term of the agreement and for 12 months thereafter,
soliciting our customers to divert their business away from us
or soliciting our employees to leave their employment with us or
soliciting individuals who were our employees during the year
prior to Mr. Andrews' termination.
The employment agreement also granted Mr. Andrews an option
to purchase 50,000 shares of our common stock
exercisable at $6.00 per share. This stock option is
subject to the provisions of our stock incentive plan and a
stock option agreement between us and Mr. Andrews.
Mr. Andrews' stock option vests in 20% installments
annually over the term of his employment agreement. If
Mr. Andrews is terminated without cause or if
Mr. Andrews terminates his employment with us for
"good reason," including the termination of employment
by Mr. Andrews within 30 days of certain events,
including a material diminution in his duties or a material
breach by us of the employment agreement, he may exercise any
vested stock options within 90 days of termination and for
a period of 90 days after the expiration of the
12 month non-compete provision. In addition, any unvested
stock options that would have vested within 12 months of
the date of his termination will become vested at the end of the
12 month period and will be exercisable for a period of
90 days following the 12 month period.
Mr. Andrews is entitled to 12-months salary if his
employment is terminated by us without cause or if
Mr. Andrews terminates his employment with us for good
reason. Mr. Andrews may terminate his employment for any
reason upon 60 days' notice to us. We may terminate
Mr. Andrews at any time for "cause" such as
personal dishonesty, willful misconduct, breach of fiduciary
duty or failure to substantially perform his duties (other than
due to disability) or any willful violation of any law or
material breach of any provision of the employment agreement. No
payments, other than payments for salary already earned as of
the date of termination will be payable to Mr. Andrews upon
termination by us for cause or by Mr. Andrews for no reason.
If Mr. Andrews' employment is terminated following a
change of control (as described below), he is entitled to his
base salary then in effect for a period of 24 months
following termination. In addition, provided Mr. Andrews
complies with the non-compete and non-solicit provisions, all of
his unvested stock options will vest and will be exercisable for
90 days after such termination and for 90 days
following the expiration of the 12-month non-compete provision.
Under the employment agreement, a "change of control"
occurs if (1) 35% or more of our capital stock is acquired
by any person other than us, (2) there is a merger or other
change in corporate structure after which 49% or more of our
capital stock is no longer held by the stockholders who held
such shares prior to the change of control or (3) 20% or
more of the members of our board elected by stockholders are
persons who were not nominated in the then most recent proxy
statement of our company.
Agreement with T. Kelley Spillane.
On
December 1, 2003, we entered into a five-year employment
agreement with T. Kelley Spillane, our senior vice
president — U.S. sales. The employment agreement,
as amended effective as of July 2005, provides for a
current annual base salary of $175,000, with increases based on
periodic reviews in the sole discretion of the compensation
committee of our board of directors.
The employment agreement otherwise contains the same terms as
Mr. Andrews' employment agreement, except that
Mr. Spillane was granted an option to
purchase 60,000 shares of our common
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stock, rather than 50,000 shares. In addition,
Mr. Spillane's stock option vests in 25% installments
over four years, rather than 20% installments over 5 years.
Agreement with Keith Bellinger.
On May 2,
2005, we entered into an employment agreement with Keith
Bellinger, our executive vice president, chief operating officer
and secretary. Pursuant to the employment agreement,
Mr. Bellinger's employment continues until terminated
by him or by us. The employment agreement provides for a current
annual base salary of $270,000, with increases in the sole
discretion of our board of directors. An increase in
Mr. Bellinger's base salary to $300,000 will be
considered by the compensation committee of our board of
directors in January 2006, based on targeted achievements to be
decided upon by Mr. Bellinger and our chairman and chief
executive officer. The employment agreement also includes
incentive performance bonuses of up to 100% of the base salary
based upon performance targets agreed upon by Mr. Bellinger
and our chairman and chief executive officer. The employment
agreement also provides certain benefits, including a
$900 per month car allowance. For 2005, if the performance
goals are met, the first $100,000 of incentive bonus is to be
paid in January 2006, and the balance, if any, of the bonus
shall be paid following March 31, 2006. Bonuses paid for
all other years shall be payable after the end of our fiscal
year.
The employment agreement also granted Mr. Bellinger an
option to purchase 150,000 shares of our common stock
exercisable at $8.00 per share. These stock options are
subject to the provisions of our stock incentive plan and a
stock option agreement between us and Mr. Bellinger.
Mr. Bellinger's stock options vest in equal annual
installments over a four year period.
The employment agreement prohibits Mr. Bellinger from
soliciting our customers to divert their business away from us
or soliciting our employees to leave their employment with us
during his employment for a period of (1) six months
following termination of employment if such termination occurs
on or before May 2, 2006 or (2) one year following
termination of employment if such termination is after
May 2, 2006.
If Mr. Bellinger's employment is terminated by us
without cause, by reason of disability or if Mr. Bellinger
resigns with "good reason," including a material
diminution in his duties, a material breach by us of the
employment agreement, a significant relocation of
Mr. Bellinger's principal work location, or a change
of control (as described below), he is entitled to a
continuation of his salary and certain health benefits for one
year (six months if termination of his employment occurs prior
to May 2, 2006) and his pro rata performance bonus for the
year in which his employment terminates. In addition,
Mr. Bellinger may terminate his employment for any reason
upon 60 days' notice to us.
Under the employment agreement, a "change of control"
occurs if there is a merger, consolidation or exchange of
securities after which a majority of our capital stock is no
longer held by the stockholders who held such shares prior to
the change of control, or a sale of substantially all of our
assets.
Agreement with Matthew F. MacFarlane.
On
December 17, 2003, Mr. MacFarlane, our senior vice
president and chief financial officer, agreed to a summary of
agreement of the terms of his employment with us.
Mr. MacFarlane's annual base salary is
$145,000 per year and he is eligible to receive a
discretionary annual bonus of up to 25% of his base salary.
Mr. MacFarlane received a $10,000 sign-on bonus. In
addition, he receives a car allowance and was provided a term
life insurance policy in the amount of $500,000.
Mr. MacFarlane was granted options to purchase
25,000 shares of our common stock exercisable at
$6.00 per share. This option is subject to our stock
incentive plan and a stock option agreement between us and
Mr. MacFarlane. Mr. MacFarlane's stock option
vests in equal annual installments of 25% over a four-year
period. The summary of agreement provides that if we are sold or
merged and there is a change of control, all of
Mr. MacFarlane's options will become fully vested and,
if he does not receive a comparable position with the new
company, we will pay him $75,000.
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Agreement with David Phelan.
On August 4,
2005, we entered into a consulting agreement with David Phelan,
our former director and executive vice president. The consulting
agreement provides that on October 1, 2005 Mr. Phelan
will become a consultant for us for a period of eighteen months
and resign as a director and executive vice president of our
company.
Mr. Phelan's consulting agreement provides for our
annual payment to him of
€
157,500
($190,040) plus value added tax to the extent he is required to
pay it, paid monthly. In addition, options held by
Mr. Phelan will remain exercisable until December 1,
2008 and, absent a breach by him, he will accrue three
years' vesting at the end of his eighteen month consulting
period. Mr. Phelan will also be reimbursed for expenses in
accordance with our reimbursement policy, including up to
€
5,000 ($6,033)
in legal fees.
The consulting agreement contains certain non-compete and
non-solicitation provisions. However, after March 31, 2006,
Mr. Phelan may request that we allow him to engage in such
activities. If we refuse, Mr. Phelan is no longer subject
to such restrictions and we must pay him his consulting fee for
the rest of the consulting period, or at his option, a lump sum
equal to
€
10,417
($12,569) plus value added tax, if applicable, times the number
of months left in the consulting period.
Royalty payments paid by us under the license agreement between
us and The Roaring Water Bay (Research & Development)
Company Limited with respect to the Trinity bottle shall
continue during Mr. Phelan's consulting period, but
under the consulting agreement we have agreed to purchase his
interest in such company on or prior to the termination of the
consulting relationship, at which time such royalty payments
shall stop.
2003 Stock Incentive Plan
We maintain the Castle Brands Inc. 2003 Stock Incentive Plan,
which was adopted by our board of directors on July 10,
2003, became effective on August 8, 2003, and was amended
February 17, 2004 to reflect the name change of our
company. We refer to the 2003 Stock Incentive Plan, as amended,
as the plan. The following description of the plan is qualified
by reference to the full text thereof, a copy of which is filed
as an exhibit to the registration statement of which this
prospectus is a part. We received stockholder approval of our
stock incentive plan on August 8, 2003.
Awards
The plan provides for the grant of incentive stock options,
non-qualified stock options, restricted stock, deferred stock,
and stock appreciation rights which may be granted to our
employees, officers, directors, consultants and advisers of us
or any entity in which we own more than a 50% beneficial
interest, except that incentive stock options may be granted
only to employees.
Administration
The plan is administered by our compensation committee or such
other committee as our board may designate to administer the
plan. Subject to the terms of the plan and applicable law, the
committee has the authority to (i) designate plan
participants; (ii) determine the type or types of awards to
be granted to a participant, (ii) determine the number of
shares of our common stock to be covered by, or with respect to
which payments, rights or other matters are to be calculated in
connection with, awards, (iv) determine the terms and
conditions of any awards, including vesting schedules (and
whether to accelerate such schedules), performance criteria and
how and when such awards may be settled and (v) to
interpret the plan and any award made thereunder. The
compensation committee's decision will be final, conclusive
and binding with respect to the interpretation and
administration of the plan, any award or any award agreement
under the plan.
Share reserve
An aggregate of 2,000,000 shares of common stock are
reserved for issuance under the plan. As of September 27,
2005, outstanding options to purchase a total of
878,500 shares of our common
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stock were held by participants under the plan, and
1,121,500 shares remained available for grant. If an
outstanding grant is surrendered, canceled or terminated without
having been exercised, or a related award is surrendered,
canceled or terminated without the award holder having received
payment, the related shares shall again be available for grant.
In the event of any corporate event affecting the shares of our
common stock, the committee in its sole discretion may make such
adjustments and other substitutions to the plan and awards under
the plan as it deems equitable.
Term of the
    plan
The plan will terminate in August 2013 unless it is terminated
earlier in accordance with the terms of the plan.
Stock options
The compensation committee may grant both incentive stock
options, referred to as ISOs, and non-qualified stock options,
referred to as NSOs, under the plan. The exercise price for
options is set by the committee, but for ISOs, may not be less
than the fair market value (as defined in the plan) of our
common stock on the grant date. In the case of an ISO granted to
an employee who at the time of such grant is a 10% stockholder,
the exercise price cannot be less than 110% of fair market value
of a share of our common stock on the grant date. The
compensation committee has the discretion to determine the
vesting schedule of each option grant. Options previously
granted under the plan generally have a vesting schedule which
vests 20% of the award on each of the first five anniversaries
of the grant date. However, options also have been granted that
are immediately exercisable. The term of each option is decided
by the committee, however no option may be exercisable beyond
ten years from the grant date. Upon the exercise of an option,
the option holder must make payment of the full exercise price,
either: (i) in cash; (ii) to the extent permitted by
law and the compensation committee, in shares of common stock
(which have been owned by the participant for at least six
months or such other period as determined by the committee);
(iii) on such other terms (including a combination of the
methods described in (i) and (ii) and conditions as
may be acceptable to the compensation committee. The committee
may provide that any shares paid for upon exercise of a stock
option using restricted or deferred stock will be restricted or
deferred in the same manner as the stock so used.
Restricted
    stock
The compensation committee may award rights to purchase
restricted stock under the plan. Purchasers of restricted stock
are subject to restrictions on transfer, which will lapse as
long as a vesting requirement is met. Restricted stock may vest
over time, or may vest based on the attainment of performance
criteria or other factors, as determined by the compensation
committee at the time of the grant. If permitted by the
committee, holders of restricted stock may exercise full voting
rights with respect to the restricted stock. The committee may
provide that dividends will be paid to a participant holding
restricted stock. If dividends on restricted stock are received
in stock, they may be subject to the same restrictions as the
restricted stock to which they relate.
Deferred stock
The committee may make an award of deferred stock under the
plan, and determine the terms and conditions of such award. A
deferred stock award is a grant of a right to received our
common stock in the future, if the grant conditions, which may
depend on performance goals or other criteria as determined by
the committee, are met. Once the deferral period ends (provided
applicable criteria have been met), the participant can receive
the award in shares of stock, in cash equal to the fair market
value of the deferred stock or a combination of shares and cash,
as determined by the committee.
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Stock appreciation
    rights
The committee may grant stock appreciation rights (SARs) either
in tandem with a stock option or independent of a stock option
under the plan. Upon the exercise of an SAR, the holder will
receive cash, shares of our common stock or a combination
thereof as determined by the committee equal to the value excess
of the fair market value of one share of our common stock on the
date of exercise over the exercise price per share of the SAR,
which exercise price is set by the committee when it makes the
award. The compensation committee will determine the terms and
conditions of SARs at the time of grant.
Transferability of options
    and stock purchase rights
The plan generally does not allow for the transfer of awards
granted under the plan and only the grantee may exercise option
rights or rights to purchase shares granted under the plan
during his or her lifetime. The plan does not impose any
restrictions on transferability of common stock issued under the
plan other than restricted stock pending lapse of restrictions.
Change in
    control
The plan provides that, unless otherwise provided at the time of
grant by the committee (or by amendment of a grant), in the
event of a change of control of us or the publication or
dissemination of an announcement of an action intended to result
in a change in control of us with respect to individuals in
service at the time of the 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 shall lapse and will be
    fully vested.
For these purposes, a change in control includes the following
events
•
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.
A change in control does not include an initial public offering
of our stock or the temporary holding of our securities by an
underwriter pursuant to such offering.
Tax
    withholding
Subject to the terms and conditions of the awards as provided by
the committee, a participant may irrevocably elect to have the
withholding tax obligation with respect to any awards satisfied
by (i) having us withhold the amount of shares otherwise
deliverable equal to such tax; (ii) deliver to us shares of
unrestricted stock equal to such tax or (iii) through any
combination described in clause (i) and (ii).
Amendment and
    termination
The plan may be amended modified or terminated by our board of
directors may at any time, in whole or in part, without the
approval of the stockholders except that to the extent such
approval is required by law, or is otherwise required for ISOs
to continue to be treated as such. Our board of
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directors, however, may not impair the rights of a participant
with respect to awards granted prior to such amendment,
suspension or termination, without the consent of such
participant.
It is intended that the plan will be amended to the extent
deemed necessary or appropriate to comply with Internal Revenue
Code Section 409A and the rules, regulations and guidance
thereunder.
Pension Plan
We maintain a group defined contribution arrangement which
provides retirement benefits for employees who are located in
Ireland. Eleven employees currently participate in this pension
program. Under the pension program, we contribute a percentage
of the participating employee's salary to the program. All
contributions, including our contributions, made to the program
are immediately vested. All contributions made to the program
are held in trust and we have appointed trustees to manage the
funds. Total monthly premiums for the program for the 2005 plan
year equal
€
4,719
($5,694),
€
3,625
($4,374) of which represent our contributions. Benefits under
the program are payable upon the participant's attaining
the normal retirement age; early retirement or retirement due to
ill health, or upon the death of the participant prior to
retirement.
With respect to Mr. Phelan, each year we contributed to the
program an amount equal to 10% of his base salary and he
contributed 5% of his base salary as an employee contribution.
In addition to this Mr. Phelan is making further additional
voluntary contributions of 10.5% of his base salary. The monthly
employer additional voluntary contributions for such plan year
equals
€
1,563
($1,886) and his monthly additional voluntary contributions for
such plan year equals
€
1,094 ($1,320)
Mr. Phelan's normal retirement age under the program
is age 60. As of October 1, 2005, Mr. Phelan will
become a consultant to us and will no longer be an employee.
Pursuant to the rules of the program, only employees and
directors may participate in the program and receive and/or make
new contributions thereunder. Because Mr. Phelan will be a
consultant, he will no longer be eligible to make or receive new
contributions under the program. Therefore, after
October 1, 2005 we will not be making any further
contributions to the program on his behalf, nor will
Mr. Phelan be permitted to make any additional
contributions on his behalf under the pension program.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since April 1, 2002, there has not been, nor is there any
proposed transaction where we were or will be a party in which
the amount involved exceeded or will exceed $60,000 and in which
any director, executive officer, holder of more than 5% of any
class of our voting securities, or any member of the immediate
family of any of the foregoing persons had or will have a direct
or indirect material interest, other than the employment
described in "Management" and the transactions
described below. These related party transactions were each
negotiated at an arm's length basis and were on no less
favorable terms to us than would have been given to a third
party.
Agreement with MHW Ltd.
Since April 1998, we and our predecessor have had an agreement
with MHW Ltd., through which MHW acts as importer of record and
distributor for our products in the United States, and provides
accounting, inventory, payment, transportation and storage
services for us. Mr. Beaudette, one of our directors, is
the president and a principal stockholder of MHW and MHW has a
10% ownership interest in our Celtic Crossing brand. For the
fiscal years ended March 31, 2003, 2004 and 2005, we
incurred fees for services rendered by MHW in the amounts of
$61,518, $84,450 and $121,393, respectively.
Agreement with BPW LLC
In April 2004, we contracted with BPW LLC, for business
development services including providing introductions for us to
agency brands and assisting us in successfully negotiating
agency agreements with targeted brands. BPW is controlled by
John Beaudette, one of our directors. The contract provides for
a monthly retainer to BPW of $3,500, a bonus payable to BPW in
equal quarterly installments upon the finalization of an agency
brand agreement based upon estimated annual case sales by us
during the first year of operations at the rate of
$1.00 per each nine-liter case of volume, less any retainer
previously paid, and a commission based upon actual future sales
of the agency brand while under our management. This contract is
cancelable by either party upon 30 days written notice. For
the fiscal year ended March 31, 2005 we paid BPW $41,802.
Agreements with Carbery Group and its affiliates
Mr. Leen, one of our directors, is the financial director
of the Carbery Group, one of our principal stockholders. Since
December 1, 2003, we have had a supply agreement with
Carbery Milk Products Limited, which is a member of the Carbery
Group, pursuant to which it acts as our sole distiller for Boru
vodka in Ireland and the supplier of natural flavors for our
products. For the fiscal years ended March 31, 2004 and
2005, we purchased approximately
€
84,572 and
€
405,359,
respectively, (recorded as $105,241 and $510,510, respectively,
in our consolidated financial statements for such fiscal years)
of goods from Carbery Milk Products. Carbery Milk Products also
holds
€
304,400
($367,289) principal amount of our 5% euro denominated notes,
which were issued to it in connection with our December 2003
acquisition of Roaring Water Bay and will convert into shares of
our common stock immediately prior to the closing of this
offering. In addition, on December 1, 2004, we repaid
subordinated indebtedness to Carbery Milk Products also incurred
by us in connection with the Roaring Water Bay acquisition in
the amount
of
€
111,102.
Agreements with Ladenburg Thalmann & Co. Inc.
In November 2004, we entered into a placement agency agreement
with Ladenburg Thalmann & Co. Inc., one of the
co-managing underwriters of this offering, to act as our
placement agent in connection with the offering and sale of our
Series C convertible preferred stock. Dr. Frost,
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one of our directors, is a principal stockholder and director of
Ladenburg Thalmann. As placement agent for that offering, we
paid Ladenburg Thalmann aggregate placement fees of $406,080
and, on various dates from November 2004 to August 2005, issued
warrants to Ladenburg Thalmann and its designees exercisable for
the purchase of an aggregate of 63,856 shares of our common
stock at an exercise price of $8.00 per share. As a
co-managing underwriter of this offering, Ladenburg Thalmann
will also receive part of the underwriting compensation paid by
us in connection with this offering. See
"Underwriting."
Transactions with Knappogue Corp.
During the fiscal year ended March 31, 2005, we paid rental
fees to Knappogue Corp. for the use of Knappogue Castle, located
in Clare County, Ireland, for various corporate purposes
including meetings and to entertain customers. Knappogue Corp.
is one of our principal stockholders and is controlled and owned
by Mr. Andrews, our chairman, president and chief executive
officer, and members of his family. For the fiscal years ended
March 31, 2003, 2004 and 2005, we paid Knappogue Corp.
$28,009, $33,000 and $13,000, respectively, in rental fees.
Loans from certain executive officers, directors and
stockholders
On June 9, 2004 our wholly owned subsidiary, Castle Brands
(USA) Corp., issued, and we guaranteed, approximately
$4.6 million principal amount of senior notes secured by
the accounts receivable and inventories of Castle Brands
(USA) to 27 investors in a private financing. As issued,
these senior notes bore an interest rate of 8% payable
semi-annually on November 30 and May 31, and matured
on May 31, 2007. Effective August 15, 2005, the terms
of these notes were modified, with the consent of the
noteholders, to mature on May 31, 2009 in exchange for an
interest rate increase to 9%. In addition, each purchaser of
senior notes received a warrant to purchase 25 shares
of our common stock at an exercise price of $8.00 per share
for each $1,000 of senior notes purchased. The following of our
directors, executive officers and/or principal stockholders
participated in this transaction:
•
Mr. Andrews, our chairman, president 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
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•
Matthew MacFarlane, our senior vice president and chief
    financial officer, purchased $10,000 of our senior notes and was
    issued a warrant to purchase 250 shares of our common
    stock.
Options issued to directors and executive officers
From August 8, 2003 to September 27, 2005, pursuant to our
stock incentive plan, we granted to our current directors and
executive officers options to purchase an aggregate of
275,000 shares of our common stock with exercise prices
ranging from $6.00 to $8.00 per share.
Compensation committee interlocks and insider
participation
None of the members of our compensation committee is, or has
been, one of our officers or employees or an officer or employee
of any of our subsidiaries. No member of our compensation
committee serves as a member of the board of directors or
compensation committee of any entity that has one or more
executive officers serving as a member of our board of directors
or compensation committee. Mark Andrews, our chairman, president
and chief executive officer, is a member of the board of
directors of IVAX Corporation and serves on its compensation
committee. Dr. Phillip Frost, one of our directors, is the
chief executive officer of IVAX.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table shows information with respect to the
beneficial ownership of shares of our common stock by the
following persons:
•
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.
Beneficial ownership is determined under the rules of the
Securities and Exchange Commission and includes shares of our
common stock for which such person has voting or investment
power or shares which such person has the right to acquire under
existing stock options, warrants or convertible notes within
60 days of September 27, 2005. The same securities may
be beneficially owned by more than one person.
Unless indicated otherwise below, the address for each listed
director and officer is Castle Brands Inc., 570 Lexington
Avenue, 29th Floor, New York, New York 10022. Except as
indicated by footnote, to our knowledge, the persons and
entities named in the table have sole voting and investment
power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws
where applicable. In calculating the percentage for each listed
person or entity, the number of shares of common stock owned by
each listed person or entity includes the shares of common stock
underlying options, warrants or convertible notes held by that
person or entity that are exercisable within 60 days of
September 27, 2005, but excludes shares of common stock
underlying options, warrants or convertible notes held by any
other person or entity. Percentage of beneficial ownership
"before offering" is based on 8,450,493 shares of
common stock outstanding as of September 27, 2005 after
giving effect to the following issuances that will occur on or
prior to the closing of this offering:
•
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 136,208 shares of common stock in payment of
    accrued dividends on our preferred stock through the estimated
    closing date of this offering.
Percentage of beneficial ownership "after offering" is
based on 10,950,493 shares of common stock outstanding
after giving effect to the issuances described above and the
number of shares of common stock to be issued in this offering.
Shares of
Percentage beneficially owned
common stock
Name and address of
beneficially
Before
After
beneficial owner
owned
offering
offering
Mark Andrews (1)
1,214,012
14.3%
11.1%
Knappogue Corp.
1,183,699
14.0%
10.8%
Mellon HBV SPV LLC (2)
200 Park Avenue, Suite 3300
New York, NY 10166
1,321,429
15.6%
12.1%
Black River Global Credit Fund Ltd. (3)
623 Fifth Avenue, 27th Floor
New York, NY 10022
660,714
7.8%
6.0%
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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
678,334
8.0%
6.2%
CNF Investments (5)
c/o Clark Enterprises, Inc.
7500 Old Georgetown Road
15th Floor
Bethesda, MD 20814
631,639
7.5%
5.8%
Massachusetts Mutual Life Ins. Company
1295 State Street
Springfield, MA 10111
500,000
5.9%
4.6%
Carbery Milk Products Limited
Ballineen Co. Cork, Ireland
541,975
6.4%
5.0%
Keith A. Bellinger (6)
14,062
*
*
Matthew F. MacFarlane (7)
15,250
*
*
David Phelan (8)
325,885
3.9%
3.0%
T. Kelley Spillane (9)
12,000
*
*
John Beaudette (10)
19,199
*
*
Robert J. Flanagan (11)
648,139
7.6%
5.9%
*
Phillip Frost, MD (12)
520,603
6.1%
4.7%
Colm Leen (13)
12,000
*
*
Richard C. Morrison
—
—
—
Frederick M. R. Smith (14)
45,397
*
*
Kevin P. Tighe
125,000
1.5%
1.1%
All directors and executive officers as
a group (11 persons) (15)
2,594,489
30.2%
23.4%
*
Less than one percent
(1)
Includes 1,183,699 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
    10,000 shares of common stock issuable upon exercise of
    options exercisable within 60 days as of September 27,
    2005; 12,500 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 as of September 27, 2005.
    Does not include 90,000 shares of common stock underlying
    options that are not exercisable within 60 days as of
    September 27, 2005.
(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 September 27, 2005.
(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 September 27, 2005.
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(4)
Includes 12,500 shares of common stock issuable upon
    exercise of warrants exercisable within 60 days as of
    September 27, 2005.
(5)
Includes 12,500 shares of common stock issuable upon
    exercise of warrants exercisable within 60 days as of
    September 27, 2005.
(6)
Does not include 150,000 shares of common stock underlying
    options that are not exercisable within 60 days of
    September 27, 2005.
(7)
Includes 2,500 shares of common stock held jointly by
    Mr. MacFarlane and his wife. Also includes
    12,500 shares of common stock issuable upon exercise of
    options exercisable with 60 days of September 27, 2005
    and 250 shares of common stock issuable upon exercise of
    warrants exercisable within 60 days as of
    September 27, 2005. Does not include 47,500 shares of
    common stock underlying options that are not exercisable within
    60 days as of September 27, 2005.
(8)
Includes 4,800 shares of common stock issuable upon
    exercise of options exercisable within 60 days as of
    September 27, 2005. Does not include 19,200 shares of
    common stock, underlying options that are not exercisable within
    60 days as of September 27, 2005.
(9)
Includes 15,000 shares of common stock issuable upon
    exercise of options exercisable within 60 days as of
    September 27, 2005. Does not include 63,000 shares of
    common stock underlying options that are not exercisable within
    60 days as of September 27, 2005.
(10)
Includes 7,199 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 as of
    September 27, 2005.
(11)
Includes 14,000 shares of common stock issuable upon
    exercise of options exercisable within 60 days as of
    September 27, 2005. Also includes 2,500 shares of
    common stock issuable upon exercise of warrants exercisable
    within 60 days as of September 27, 2005 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
    619,139 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 September 27, 2005. 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.
(12)
Includes 25,000 shares of common stock issuable upon
    exercise of warrants exercisable within 60 days as of
    September 27, 2005 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.
(13)
Includes 12,000 shares of common stock issuable upon
    exercise of options exercisable within 60 days of
    September 27, 2005.
(14)
Includes 12,000 shares of common stock issuable upon
    exercise of options exercisable within 60 days of
    September 27, 2005.
(15)
Includes 89,300 shares of common stock issuable upon
    exercise of options, and 46,500 shares of common stock
    issuable upon exercise of warrants, exercisable within
    60 days of September 27, 2005. Does not include
    369,700 shares of common stock underlying options that are
    not exercisable within 60 days of September 27, 2005.
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DESCRIPTION OF SECURITIES
Our certificate of incorporation and bylaws will be amended and
restated on or prior to the closing of this offering. As a
result, upon the consummation of this offering, we will be
authorized to issue 45,000,000 shares of common stock,
$.01 par value, and 5,000,000 shares of undesignated
preferred stock, $.01 par value. As of the date of this
prospectus, we have 3,106,666 shares of common stock
outstanding and 4,089,465 shares of preferred stock
outstanding. Upon the consummation of this offering all of our
preferred stock and certain of our convertible notes will be
converted into common stock and we will issue shares of common
stock in payment of all of our accrued and unpaid dividends and,
following such conversion and payment of dividends, we will have
8,450,493 shares of common stock outstanding, not including
the 2,500,000 shares offered hereby, held of record by 188
stockholders, and no shares of preferred stock outstanding. The
following description of our capital stock is intended to be a
summary and does not describe all provisions of our amended and
restated certificate of incorporation or our amended and
restated bylaws or those of the Delaware General Corporation
Law, referred to as Delaware law, applicable to us. Throughout
this "Description of Securities," references to our
certificate of incorporation and bylaws mean the amended and
restated certificate of incorporation and amended and restated
by laws, respectively. For a more thorough understanding of the
terms of our capital stock, you should refer to our amended and
restated certificate of incorporation and amended and restated
bylaws, which will be effective upon the closing of this
offering, forms of which are included as exhibits to the
registration statement of which this prospectus forms a part.
Common stock
The holders of our common stock are entitled to one vote per
share on all matters to be voted upon by stockholders. There is
no cumulative voting. Subject to preferences that may be
applicable to any outstanding preferred stock, holders of our
common stock are entitled to receive ratably such dividends as
may be declared by our board of directors out of funds legally
available for that purpose. In the event of our liquidation,
dissolution or winding up, the holders of our common stock are
entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preferences of any
outstanding preferred stock. Holders of our common stock have no
preemptive or conversion rights or other subscription rights and
our common stock has no redemption or sinking fund provisions.
Preferred stock
Our certificate of incorporation authorizes our board of
directors, without any vote or action by the holders of our
common stock, to issue preferred stock from time to time in one
or more series. Our board of directors is authorized to
determine the number of shares and to fix the voting powers, if
any, designations, powers and preferences and the relative,
participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions of any series of
preferred stock. Issuances of preferred stock will be subject to
the applicable rules of the American Stock Exchange or other
organizations on which our securities are then quoted or listed.
Depending upon the terms of preferred stock established by our
board of directors, any or all series of preferred stock could
have preference over our common stock with respect to dividends
and other distributions and upon our liquidation. If any shares
of preferred stock are issued with voting powers, the voting
power of the outstanding common stock would be diluted.
6% convertible notes
On March 1, 2005, we entered into a convertible note
purchase agreement with an institutional investor, whereby we
agreed to issue up to $10.0 million principal amount of
notes convertible into our common stock at a conversion price of
$8.00 per share. We issued two notes each in the amount of
$5.0 million to the institutional investor on March 1,
2005 and June 27, 2005. On August 16, 2005, we amended
and restated the convertible note purchase agreement to
(a) increase the amount of loans under such agreement to
$15 million and (b) provide for 40% of the outstanding
principal amount of
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the notes to convert automatically into common stock upon an
initial public offering of our common stock at a conversion
price of $7.00 per share. Upon the consummation of this offering
and the conversion of $6.0 million principal amount of our
6% convertible notes, we will have $9.0 million
principal amount of our 6% convertible notes outstanding.
They bear interest at the rate of 6% per annum, payable
quarterly, at our option, in cash or in additional notes bearing
an interest rate of 7.5% per annum. We may not prepay our
6% convertible notes without the consent of the holders.
The outstanding balance of our 6% convertible notes may be
converted into common stock at any time at the option of the
holders at a conversion rate of $8.00 per share and will
automatically convert at such time as the closing price of our
common stock is $20.00 per share or more for thirty
consecutive days at any time after March 1, 2008.
These 6% convertible notes are subject to customary
restrictive covenants. In addition, for as long as there is at
least $1.5 million aggregate principal amount outstanding
under our 6% convertible notes (a) the approval of
holders of at least a majority of the aggregate principal amount
of the 6% convertible notes outstanding is required before
we may pay dividends or make a distribution or payment on our
equity securities or redeem or repurchase our equity securities
(other than repurchases from employees upon termination of their
employment) and (b) the approval of holders of at least
seventy percent of the aggregate principal amount of the
6% convertible notes outstanding is required before we may
engage in a transaction with an affiliate or incur indebtedness
in excess of $30.0 million; provided, however, that the
indebtedness covenant will no longer be applicable if the
product of our fully diluted securities multiplied by the
average of the highest bid and lowest asked prices on the
exchange or over-the-counter quotation system on which our
common stock is listed is at least $100.0 million for a
period of at least 90 days. The limit on indebtedness does
not include indebtedness that is incurred in connection with the
acquisition of a brand related to, or an entity doing business
in or related to, the beverage alcohol market, to the extent
such indebtedness (including costs and fees associated with
incurring such debt) does not exceed an amount equal to three
times the target's earnings before interest, taxes,
depreciation and amortization.
As long as both holders of our 6% convertible notes hold at
least 5% of our capital stock (on an as converted basis), each
has the right to have a representative attend the meetings of
our board of directors as an observer.
Options
As of September 27, 2005, we had 878,500 shares of common
stock reserved for issuance upon the exercise of outstanding
stock options granted under our stock incentive plan, with
exercise prices ranging from $6.00 to $8.00 per share, and
up to 1,121,500 additional shares of common stock reserved for
issuance upon the exercise of options that may be granted under
our stock incentive plan in the future. As of September 27,
2005, we also had 10,000 shares of common stock reserved
for issuance upon the exercise of non-plan stock options, with
an exercise price of $6.00 per share. For a more complete
discussion of our stock incentive plan, see
"Management — 2003 stock incentive plan."
Warrants
As of September 27, 2005, we had outstanding warrants
exercisable for the purchase of up to 598,618 shares of
common stock at exercise prices ranging from $6.00 to
$8.00 per share. As of September 27, 2005 all of these
warrants were immediately exercisable.
Registration rights
The holders of all of the 8,450,493 shares of our common
stock that will be outstanding upon the consummation of this
offering, not including the 2,500,000 shares offered
hereby, as well as the holders of warrants to
purchase 598,618 shares of our common stock and the
holders of our 6% convertible notes due in 2010, will be
entitled to "piggyback" registration rights, which
entitle the holder to include the holder's registrable
securities in any registration statement filed by us after the
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closing of this offering under the Securities Act of 1933, as
amended, covering the sale of our securities. The
"piggyback" registration rights are subject to certain
standard limitations, including, in the event the registration
statement relates to an underwritten public offering, the right
of our underwriters to reduce the number of shares proposed to
be registered ratably in view of market conditions. We will bear
all expenses (exclusive of all underwriting discounts and
commissions) of all piggyback registrations. The piggyback
registration rights will terminate, with respect to certain of
the foregoing holders, on the later of the second anniversary of
the effective date of this registration statement and the date
on which the holder is no longer an "affiliate" under
Rule 144 of the Securities Act, and, with respect to the
other holders, on the second anniversary of the effective date
of this registration statement. These registration rights may
not be used in connection with the registration of our
securities in a Rule 145 transaction or relating solely to
employee benefit plans.
In connection with our Amended and Restated Warrant Agreement
with Keltic Financial Partners, LP for the purchase of
100,000 shares of our common stock, we have agreed that if
on 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) we have
not filed a registration statement with respect to which Keltic
had the opportunity to register such unregistered shares, we
will pay Keltic $100,000 within ten (10) days of such date.
Anti-takeover considerations
General
Our certificate of incorporation, our bylaws and the Delaware
law contain provisions that could delay or make more difficult
an acquisition of control of our company not approved by our
board of directors, whether by means of a tender offer, open
market purchases, a proxy contest or otherwise. These provisions
have been implemented to enable us, particularly, but not
exclusively, in the initial years of our existence as a publicly
owned company, to develop our business in a manner that will
foster our long-term growth without disruption caused by the
threat of a takeover not deemed by our board of directors to be
in the best interests of our company and our stockholders. These
provisions could have the effect of discouraging third parties
from making proposals involving an acquisition or change of
control of our company even if such a proposal, if made, might
be considered desirable by a majority of our stockholders. These
provisions may also have the effect of making it more difficult
for third parties to cause the replacement of our current
management without the concurrence of our board of directors.
Set forth below is a description of the provisions contained in
our certificate of incorporation and bylaws and the Delaware law
that could impede or delay an acquisition of control of our
company that our board of directors has not approved. This
description is intended as a summary only and is qualified in
its entirety by reference to our certificate of incorporation
and bylaws, forms of each of which are included as exhibits to
the registration statement of which this prospectus forms a
part, as well as the Delaware law.
Authorized but unissued preferred stock
Our certificate of incorporation authorizes our board of
directors to issue one or more series of preferred stock and to
determine, with respect to any series of preferred stock, the
terms and rights of such series without any vote or action by
the holders of our common stock. The existence of authorized but
unissued shares of preferred stock may enable our board of
directors to render more difficult or discourage an attempt to
obtain control of our company by means of a proxy contest,
tender offer or other extraordinary transaction. Any issuance of
preferred stock with voting and conversion rights may adversely
affect the voting power of the holders of our common stock,
including the loss of voting control to others. The existence of
authorized but unissued shares of preferred stock will also
enable our board of directors, without stockholder approval, to
adopt a "poison pill" takeover defense mechanism. We
have no present plans to issue any shares of preferred stock.
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Number of directors; removal; filling vacancies
Our certificate of incorporation and bylaws provide that the
number of directors shall be fixed only by resolution of our
board of directors from time to time. Our bylaws provide that
directors may be removed, with or without cause, by stockholders
by the affirmative vote of at least a majority of the shares
entitled to vote at an annual or a special meeting called for
that purpose. Our certificate of incorporation and bylaws
provide that vacancies on our board of directors may be filled
only by a majority vote of the remaining directors.
Stockholder action
Our certificate of incorporation provides that stockholder
action may be taken only at an annual or special meeting of
stockholders. This provision prohibits stockholder action by
written consent in lieu of a meeting. Our bylaws further provide
that special meetings of stockholders may be called only by our
board of directors, the chairman of our board of directors or
our chief executive officer. Stockholders are not permitted to
call a special meeting or to require our board of directors to
call a special meeting of stockholders.
The provisions of our certificate of incorporation and bylaws
prohibiting stockholder action by written consent may have the
effect of delaying consideration of a stockholder proposal until
the next annual meeting unless a special meeting is called as
provided above. These provisions would also prevent the holders
of a majority of the voting power of our stock from unilaterally
using the written consent procedure to take stockholder action.
Moreover, a stockholder could not force stockholder
consideration of a proposal over the opposition of the board of
directors by calling a special meeting of stockholders prior to
the time our chairman, our board of directors or our chief
executive officer believes the consideration to be appropriate.
Advance notice for stockholder proposals and director
nominations
Our bylaws establish an advance notice procedure for stockholder
proposals to be brought before any annual or special meeting of
stockholders and for nominations by stockholders of candidates
for election as directors at an annual meeting or a special
meeting at which directors are to be elected. Subject to any
other applicable requirements, including, without limitation,
Rule 14a-8 under the Securities Exchange Act of 1934, only
such business may be conducted at a meeting of stockholders as
has been brought before the meeting by, or at the direction of,
our board of directors, or by a stockholder who has given our
Secretary timely written notice, in proper form, of the
stockholder's intention to bring that business before the
meeting. The chairman of the meeting has the authority to make
such determinations. Only persons who are nominated by, or at
the direction of, our board of directors, or who are nominated
by a stockholder that has given timely written notice, in proper
form, to our Secretary prior to a meeting at which directors are
to be elected, will be eligible for election as directors.
Amendments to bylaws
Our certificate of incorporation provides that only our board of
directors has the power to amend or repeal our bylaws.
Amendments to certificate of incorporation
Any proposal to amend, alter, change or repeal any provision of
our certificate of incorporation requires approval by the
affirmative vote of a majority of the voting power of all of the
shares of our capital stock entitled to vote on such amendment
or repeal, voting together as a single class, at a duly
constituted meeting of stockholders called expressly for that
purpose.
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Delaware statutory provisions
We are subject to the provisions of Section 203 of the
Delaware law regulating corporate takeovers. This section
prevents Delaware corporations, under certain circumstances,
from engaging in a "business combination" with:
•
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;
for three years following the date that the stockholder became
an interested stockholder. A "business combination"
includes a merger or sale of more than 10% of our assets.
However, the above provisions of Section 203 do not apply
if:
•
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.
This statute could prohibit or delay mergers or other change in
control attempts, and thus may discourage attempts to acquire us.
Limitation of liability and indemnification of officers and
directors
Our certificate of incorporation and bylaws limit the liability
of directors to the fullest extent permitted by the Delaware
law. In addition, they provide that we will indemnify our
directors and officers to the fullest extent permitted by law.
In connection with this offering, we are entering into
indemnification agreements with our current directors and
executive officers and expect to enter into a similar agreement
with any new directors or executive officers.
Transfer agent and registrar
Upon the closing of this offering, the transfer agent and
registrar for our common stock will be Continental Stock
Transfer & Trust Company, New York, NY.
Listing
We expect that as of the date of this prospectus our common
stock will be approved for quotation on the American Stock
Exchange under the symbol "ROX."
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our
common stock. We cannot predict the effect, if any, that market
sales of shares, or the availability of shares for sale, will
have on the market price of our common stock prevailing from
time to time. Sales of our common stock in the public market
after the restrictions described below lapse, or the perception
that those sales may occur, could cause the prevailing market
price to decline or to be lower than it might be in the absence
of those sales or perceptions.
Sale of restricted shares
Upon completion of this offering, we will have
10,950,493 shares of common stock outstanding, based on the
3,106,666 shares outstanding as of September 27, 2005,
the 5,209,970 shares to be issued upon the conversion of
our preferred stock and certain of our convertible notes upon
the consummation of this offering, the 133,857 shares of our
common stock to be issued in payment of accrued and unpaid
dividends on our preferred stock and the 2,500,000 shares
offered hereby. Of these shares, the shares sold in this
offering, plus any shares sold upon exercise of the
underwriters' over-allotment option, will be freely
tradable without restriction under the Securities Act, except
for any shares purchased by our "affiliates" as that
term is defined in Rule 144 under the Securities Act. In
general, affiliates include executive officers, directors, and
10% stockholders. Shares purchased by affiliates will remain
subject to the resale limitations of Rule 144.
The other 8,450,493 shares that will be outstanding
following this offering are restricted securities within the
meaning of Rule 144. Restricted securities may be sold in
the public market only if registered or if they qualify for an
exemption from registration under Rules 144, 144(k)
or 701 promulgated under the Securities Act, which are
summarized below.
Taking into account the lock-up agreements described below, and
assuming Oppenheimer & Co. Inc. does not release shares
from these agreements, the following shares will be eligible for
sale in the public market at the following times:
•
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; and
•
beginning 180 days after the effective date of the
    registration statement of which this prospectus forms a part,
    approximately                        shares
    will be eligible for sale pursuant to Rule 144(k), none of
    which are held by affiliates, and
    approximately                        additional
    shares held by affiliates will be eligible for sale subject to
    volume, manner of sale, and other limitations under
    Rule 144.
Lock-up agreements
Our directors, executive officers and holders of substantially
all of our common stock and derivative securities have entered
into lock-up agreements in connection with this offering,
generally providing that they will not offer, sell, contract to
sell, or grant any option to purchase or otherwise dispose of
our common stock or any securities exercisable for or
convertible into our common stock owned by them for a period of
180 days after the date of this prospectus without the
prior written consent of Oppenheimer & Co. Inc., as
representative of the underwriters. Despite possible earlier
eligibility for sale under the provisions of Rules 144,
144(k) and 701, shares subject to lock-up agreements will not be
salable until these agreements expire or are waived by the
representative. These agreements are more fully described in
"Underwriting."
We have been advised by the representative that it may in its
discretion waive the lock-up agreements; however, it has no
current intention of releasing any shares subject to a lock-up
agreement. The release of any lock-up would be considered on a
case-by-case basis. In considering any request to release shares
covered by a lock-up agreement, the representative would
consider circumstances of
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emergency and hardship. No agreement has been made between the
underwriters and us or any of our stockholders pursuant to which
the representative will waive the lock-up restrictions.
Rule 144
In general, under Rule 144 as currently in effect, a person
who has beneficially owned restricted securities for at least
one year would be entitled to sell within any three-month period
a number of shares that does not exceed the greater of the
following:
•
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.
Sales under Rule 144 are also subject to requirements with
respect to manner of sale, notice, and the availability of
current public information about us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been
one of our affiliates at any time during the three months
preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, is entitled to sell
his or her shares without complying with the manner of sale,
public information, volume limitation or notice provisions of
Rule 144. Therefore, unless otherwise restricted pursuant
to the lock-up agreements or otherwise, those shares may be sold
immediately upon the completion of this offering.
Rule 701
Under Rule 701 as currently in effect, each of our
employees, officers, directors and consultants who purchased
shares pursuant to a written compensatory plan or contract is
eligible to resell these shares 90 days after the effective
date of this offering in reliance upon Rule 144, but
without compliance with specific restrictions. Rule 701
provides that affiliates may sell their
Rule 701 shares under Rule 144 without complying
with the holding period requirement and that non-affiliates may
sell their shares in reliance on Rule 144 without complying
with the holding period, public information, volume limitation
or notice provisions of Rule 144.
Form S-8 registration statements
We intend to file one or more registration statements on
Form S-8 under the Securities Act as soon as practicable
after the completion of this offering for shares issued upon the
exercise of options and shares to be issued under our employee
benefit plans. As a result, any options or rights exercised
under the stock incentive plan or any other benefit plan after
the effectiveness of the registration statements will also be
freely tradable in the public market. However, such shares held
by affiliates will still be subject to the volume limitation,
manner of sale, notice and public information requirements of
Rule 144 unless otherwise resalable under Rule 701.
Registration rights
Beginning six months after the consummation of this offering,
holders of the 8,450,493 restricted shares of our common stock,
warrants to purchase 598,618 shares of common stock and
6% convertible notes convertible into 1,125,000 shares
of our common stock will be entitled to piggyback registration
rights with respect to these shares for sale in the public
market. See "Description of Securities —
registration rights." Registration of these shares under
the Securities Act would result in their becoming freely
tradable without restriction under the Securities Act
immediately upon effectiveness of the applicable registration
statement.
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UNDERWRITING
We have entered into an underwriting agreement with the
underwriters listed below with respect to the shares of our
common stock being offered in this offering. In accordance with
the terms and conditions contained in the underwriting
agreement, we have agreed to sell to each of the listed
underwriters, and each of the listed underwriters, for which
Oppenheimer & Co. Inc. is acting as representative,
have severally, and not jointly, agreed to purchase from us on a
firm commitment basis, the number of shares offered in this
offering set forth opposite their respective names below:
Underwriters
Number of Shares
Oppenheimer & Co. Inc.
ThinkEquity Partners LLC
Ladenburg Thalmann & Co. Inc.
Total
2,500,000
A copy of the underwriting agreement has been filed as an
exhibit to the registration statement of which this prospectus
forms a part.
We have been advised by the representative that the underwriters
propose to offer the shares directly to the public at the public
offering price set forth on the cover page of this prospectus.
Any shares sold by the underwriters to securities dealers will
be sold at the public offering price less a selling concession
not in excess of
$            per
share. The underwriters may allow, and these selected dealers
may re-allow, a concession of not more than
$            per
share to other brokers and dealers.
The underwriting agreement provides that the underwriters'
obligations to purchase shares are subject to conditions
contained in the underwriting agreement. The underwriters are
obligated to purchase and pay for all of the shares offered by
this prospectus, other than those covered by the over-allotment
option described below (unless and until that option is
exercised), if any of these shares are purchased.
No action has been taken by us or the underwriters that would
permit a public offering of the shares offered hereby in any
jurisdiction where action for that purpose is required. None of
our shares included in this offering may be offered or sold,
directly or indirectly, nor may this prospectus or any other
offering material or advertisements in connection with the offer
and sales of the shares be distributed or published in any
jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of that
jurisdiction. Persons who receive this prospectus are advised to
inform themselves about and to observe any restrictions relating
to this offering of our shares and the distribution of this
prospectus. This prospectus is neither an offer to sell nor a
solicitation of any offer to buy any of the securities included
in this offering in any jurisdiction where that would not be
permitted or legal.
The underwriters have advised us that they do not expect sales
to discretionary accounts to exceed five percent of the total
number of shares offered.
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Underwriting discount and expenses
The following table summarizes the underwriting discount to be
paid to the underwriters by us:
Total, with no
Total, with full
over-allotment
over-allotment
Underwriting discount to be paid to the underwriters by us for
    the shares offered
$
$
We have agree to pay to the representative, on behalf of the
underwriters, a non-accountable expense allowance equal to
$125,000, of which $50,000 has been paid by us as of the date of
this prospectus. We have also agreed to pay all expenses in
connection with qualifying the shares offered hereby under the
laws of the states designated by the underwriters, including
expenses of counsel retained for this purpose by the
underwriters. We have also agreed to pay the fees of counsel
retained by the underwriters for purposes of filing this
offering with the NASD, with such fees estimated not to exceed
$5,000. We estimate the expenses payable by us for this offering
to be
$           ,
including the underwriting discount and the underwriters'
non-accountable expense allowance, or
$           if
the underwriters' over-allotment option is exercised in
full.
Over-allotment option
We have granted to the underwriters an option, exercisable not
later than 30 days after the date of this prospectus, to
purchase up to 375,000 additional shares, identical to the
shares offered hereby, at the public offering price, less the
underwriting discount, set forth on the cover page of this
prospectus. The underwriters may exercise the option solely to
cover over-allotments, if any, made in connection with this
offering. If any shares are purchased pursuant to the
over-allotment option, the underwriters will offer these
additional shares on the same terms as those on which the other
shares ore being offered hereby. If any shares are purchased
pursuant to this over-allotment option, the underwriters will
severally purchase shares in approximately the same proportion
as set forth in the table above.
Lock-ups
We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any shares or
our common stock or securities convertible into or exchangeable
or exercisable for any shares of our common stock, or publicly
disclose the intention to make any offer, sale, pledge,
disposition or filing, without the prior written consent of the
representative of the underwriters, for a period of
180 days after the date of this prospectus. This agreement
does not apply to the filing of a registration statement on
Form S-8 under the Securities Act to register securities
issuable under our existing employee benefit plans, our issuance
of common stock upon exercise of an existing option or our
granting of awards pursuant to our existing employee benefit
plans (subject to the lock-up restrictions described below).
Our officers, directors and holders of substantially all of our
common stock and derivative securities have agreed that they
will not, other than as contemplated by this prospectus, offer,
sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, enter into a transaction that would have
the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of our common stock, whether
any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or
publicly disclose, unless required by law, the intention to make
any offer, sale, pledge or disposition, or to enter into any
transaction, swap, hedge or other arrangement, without, in each
case, the prior written consent of the representative for a
period of 180 days after the date of this prospectus. These
agreements are subject to several exceptions.
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Reserved share program
At our request, the underwriters have reserved for sale at the
initial public offering price up to 5%, or 125,000, of the
shares of our common stock offered in this offering for sale to
our directors, officers, employees, business associates and
related persons who have expressed an interest in purchasing
common stock in the offering. The 125,000 reserved shares will
be allocated by us among the participants in the reserved share
program in such amounts as we may determined in our sole
discretion. Individuals who purchase these shares will be
subject to a 45-day lock-up period on such shares. The number of
shares available for sale to the general public in the offering
will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same
terms as the other shares.
Determination of offering price
Prior to the offering, there has been no public market for our
common stock. The initial public offering price of the shares
offered hereby will be determined by negotiation among us and
the representative of the underwriters. The principal factors to
be considered in determining the initial public offering price
of the shares will include:
•
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.
Stabilization, short positions and penalty bids
In connection with this offering, the underwriters may engage in
over-allotment, syndicate covering transactions, stabilizing
transactions and penalty bids or purchases for the purpose of
pegging, fixing or maintaining the price of our common stock, as
described below:
•
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-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
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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.
These syndicate covering transactions, stabilizing transactions
and penalty bids may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding
a decline in the market prices of our common stock. As a result,
the prices of our shares may be higher than the price that might
otherwise exist for such shares in the open market. These
transactions may be effected on the American Stock Exchange, in
the over-the-counter market or otherwise and, if commenced, may
be discontinued at any time.
Neither we nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that
the transactions described above may have on the prices of our
common stock. In addition, neither we nor the underwriters make
any representation that the underwriters will engage in these
stabilizing transactions or that any transaction, once
commenced, will not be discontinued without notice.
Indemnification
We have agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities
Act, and/or to contribute to payments the underwriters may be
required to make with respect to any of these liabilities.
Electronic delivery
A prospectus in electronic format may be made available on the
websites maintained by one or more of the underwriters, or
selling group members, if any, participating in this offering
and one or more of the underwriters participating in this
offering may distribute prospectuses electronically. The
representative may agree to allocate a number of shares to
underwriters and selling group members for sale to their own
online brokerage account holders. Internet distributions will be
allocated by the underwriters and selling group members that
will make internet distributions on the same basis as other
allocations.
Other relations with the underwriters
Certain of the underwriters and their respective affiliates
have, from time to time, performed, and may in the future
perform, various financial advisory and investment banking
services for our company and our affiliates, for which they
received or will receive customary fees and expenses.
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LEGAL MATTERS
The validity of the common stock in this offering will be passed
upon for us by Patterson Belknap Webb & Tyler LLP, New
York, NY. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Blank Rome LLP, New
York, NY.
EXPERTS
The financial statements of Castle Brands Inc. as of
March 31, 2004 and 2005, and for each of the fiscal years
ending March 31, 2003, 2004 and 2005, as set forth in their
report, have been included herein and in the Registration
Statement in reliance upon the report of Eisner LLP, independent
registered public accounting firm, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and
auditing.
The financial statements of the Castle Brands Spirits Company
Limited (formerly known as the Roaring Water Bay Spirits Company
Limited) and of The Roaring Water Bay Spirits Company
(GB) Limited included in this prospectus and in the
Registration Statement have been audited by BDO Simpson Xavier,
an independent registered public accounting firm, to the extent
and for the periods set forth in their reports appearing
elsewhere herein and in the Registration Statement, and are
included in reliance upon such reports given upon the authority
of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the
Securities and Exchange Commission relating to the common stock
offered by this prospectus. This prospectus does not contain all
of the information set forth in the registration statement and
the exhibits and schedules to the registration statement.
Statements contained in this prospectus as to the contents of
any contract or other document referred to are not necessarily
complete and in each instance we refer you to the copy of the
contract or other document filed as an exhibit to the
registration statement, each such statement being qualified in
all respects by such reference. For further information with
respect to our company and the common stock offered by this
prospectus, we refer you to the registration statement,
exhibits, and schedules.
Anyone may inspect a copy of the registration statement without
charge at the public reference facility maintained by the SEC in
Room 1580, 100 F Street, N.E.,
Washington, D.C. 20549. Copies of all or any part of the
registration statement may be obtained from that facility upon
payment of the prescribed fees. The public may obtain
information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. The SEC maintains a website
at http://www.sec.gov that contains reports, proxy and
information statements, and other information regarding
registrants that file electronically with the SEC.
-97-
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of
    March 31, 2004 and 2005 and as of June 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
three-months ended June 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
    three-months ended June 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 three-months ended June 30, 2004 and 2005
    (unaudited)
F-6
Notes to Consolidated Financial
    Statements
F-7
Report of Independent Registered Public
    Accounting Firm
F-45
Profit and Loss Accounts for the years
    ended December 31, 2003 and 2002 for The Castle Brands
    Spirits Company Limited (formerly known as The Roaring Water Bay
    Spirits Company Limited)
F-49
Balance Sheets as of December 31, 2003
    and 2002 for The Castle Brands Spirits Company Limited (formerly
    known as The Roaring Water Bay Spirits Company Limited)
F-50
Cash Flow Statement for the years ended
    December 31, 2003 and 2002 for The Castle Brands Spirits
    Company Limited (formerly known as The Roaring Water Bay Spirits
    Company Limited)
F-51
Notes to Financial Statements
F-52
Report of Independent Registered Public
    Accounting Firm
F-70
Profit and Loss Accounts for the years
    ended December 31, 2003 and 2002 for The Roaring Water Bay
    Spirits Company (GB) Limited
F-73
Balance Sheets as of December 31, 2003
    and 2002 for The Roaring Water Bay Spirits Company
    (GB) Limited
F-74
Notes to Financial Statements
F-75
Report of Independent Registered Public
    Accounting Firm
F-80
Reconciliation of Castle Brands Spirits Company Limited
    Financial Statements to U.S. GAAP
F-81
Reconciliation of the Roaring Water Bay Spirits Company (GB)
    Limited to U.S. GAAP
F-83
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Castle Brands Inc.
We have audited the accompanying consolidated balance sheets of
Castle Brands Inc. and subsidiaries as of March 31, 2004
and 2005, and the related consolidated statements of operations,
stockholders' equity (deficiency) and cash flows for each
of the years in the three year period ended March 31, 2005. Our
audits also included the financial statement schedule listed at
Item 16(b). These financial statements and schedule are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements enumerated above
present fairly, in all material respects, the consolidated
financial position of Castle Brands Inc. and subsidiaries as of
March 31, 2004 and 2005, and the consolidated results of
their operations and their consolidated cash flows for each of
the years in the three year period ended March 31, 2005 in
conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related
consolidated financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
/s/
Eisner
LLP
Eisner LLP
New York, New York
September 9, 2005
F-2
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Pro Forma
March 31,
Balance Sheet
June 30,
June 30, 2005
2004
2005
2005
(Note 1D)
(Unaudited)
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
3,461,441
$
5,676,398
$
5,031,442
$
12,546,535
Accounts receivable - net of allowance for doubtful
    accounts of $57,772, $80,847 and $92,576
2,005,258
3,614,816
4,573,728
4,573,728
Due from related parties
—
355,161
641,492
641,492
Inventories
3,696,609
5,496,978
5,430,076
5,430,076
Prepaid expenses and other current assets
371,372
326,736
663,090
663,090
TOTAL CURRENT ASSETS
9,534,680
15,470,089
16,339,828
23,854,921
EQUIPMENT
- net
258,446
350,139
336,089
336,089
OTHER ASSETS
Intangible assets - net of accumulated amortization of
    $303,503, $318,698 and $459,478
6,447,540
14,475,116
14,351,681
14,351,681
Goodwill
11,305,931
11,756,051
11,759,359
11,759,359
Restricted cash
—
387,494
361,993
361,993
Other assets
212,235
816,120
806,219
806,219
TOTAL ASSETS
$
27,758,832
$
43,255,009
$
43,955,169
51,470,262
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Current maturities of notes payable and capital leases
$
1,335,361
$
3,032,383
$
1,965,391
$
1,965,391
Accounts payable and accrued expenses
2,866,808
4,682,517
4,963,674
4,963,674
Due to related parties
347,888
1,610,155
1,248,031
1,248,031
Shareholder loans payable
197,782
156,865
142,366
142,366
TOTAL CURRENT LIABILITIES
4,747,839
9,481,920
8,319,462
8,319,462
LONG TERM LIABILITIES
Senior notes payable
—
4,561,472
4,570,706
4,570,706
Notes payable, less current maturities and obligations under
    capital leases
595,958
6,678,203
11,644,031
10,644,031
Shareholder loans payable
292,066
157,347
151,640
151,640
Convertible shareholder loans payable
1,674,171
1,775,627
1,658,773
—
Preferred stock dividends payable
319,819
681,280
752,707
752,707
Deferred tax liability
629,444
2,851,666
2,814,629
2,814,629
TOTAL LIABILITIES
8,259,297
26,187,515
29,911,948
27,253,175
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 3,741,985 at June 30, 2005,
    liquidation preference of $21,731,285, $29,681,285 and
    $29,752,713
19,328,630
25,958,964
25,926,018
—
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS
2,065
3,330,677
3,201,518
3,201,518
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.01 par value, 20,500,000 shares
    authorized, 3,106,666 shares issued and outstanding
31,067
31,067
31,067
85,000
Additional paid in capital
17,956,680
18,012,645
17,965,084
54,011,035
Accumulated deficiency
(17,776,961
)
(30,071,286
)
(33,180,489
)
(33,180,489
)
Accumulated other comprehensive (loss)/ income
(41,946
)
(194,573
)
100,023
100,023
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)
168,840
(12,222,147
)
(15,084,315
)
$
21,015,569
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
    (DEFICIENCY)
$
27,758,832
$
43,255,009
$
43,955,169
$
51,470,262
See accompanying notes to the consolidated financial statements.
F-3
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
Years Ended March 31,
June 30,
2003
2004
2005
2004
2005
(Unaudited)
Sales, net
$
2,419,062
$
4,826,919
$
12,617,863
$
2,163,014
$
4,498,473
Cost of sales
1,427,486
3,285,467
8,744,859
1,482,492
2,647,272
Gross profit
991,576
1,541,452
3,873,004
680,522
1,851,201
Selling expense
3,348,279
5,397,919
11,568,997
2,977,621
3,225,382
General and administrative expense
817,837
1,960,374
3,636,626
795,373
1,137,477
Depreciation and amortization
72,621
173,414
167,086
26,310
182,385
Other (income)/expense, net
11,065
165,545
(198,755
)
22,999
322,426
Operating loss before interest expense, net, income tax benefit
    and minority interest
(3,258,226
)
(6,155,800
)
(11,300,950
)
(3,141,781
)
(3,016,469
)
Interest expense, net
(182,494
)
(303,516
)
(998,096
)
(465,740
)
(258,930
)
Income tax benefit
–
–
–
–
37,037
Minority interests
–
35,339
4,721
2,065
129,159
Net loss
$
(3,440,720
)
$
(6,423,977
)
$
(12,294,325
)
$
(3,605,456
)
$
(3,109,203
)
Preferred stock dividends
14,960
557,929
525,605
86,388
71,428
Net loss attributable to common stockholders
$
(3,455,680
)
$
(6,981,906
)
$
(12,819,930
)
$
(3,691,844
)
$
(3,180,631
)
Net loss attributable to common stockholders per common share
Basic
$
(1.88
)
$
(3.12
)
$
(4.13
)
$
(1.19
)
$
(1.02
)
Diluted
$
(1.88
)
$
(3.12
)
$
(4.13
)
$
(1.19
)
$
(1.02
)
Weighted average shares used in computation
Basic
1,840,602
2,236,739
3,106,666
3,106,666
3,106,666
Diluted
1,840,602
2,236,739
3,106,666
3,106,666
3,106,666
See accompanying notes to the consolidated financial statements.
F-4
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders'
Equity (Deficiency)
Membership
Accumulated
Total
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
(3,440,720
)
(3,440,720
)
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 dividends
$
(14,960
)
(14,960
)
BALANCE, MARCH 31, 2003
360,000
9,922,701
(14,960
)
(11,352,984
)
(1,445,243
)
Comprehensive loss
Net loss
(6,423,977
)
(6,423,977
)
Foreign currency
translation adjustment
$
(41,946
)
(41,946
)
Total comprehensive loss
(6,465,923
)
Value ascribed to warrants issued in
connection with asset based loan
282,295
282,295
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
Accrued preferred dividends
(304,859
)
(304,859
)
BALANCE, MARCH 31, 2004
—
—
3,106,666
31,067
17,956,680
(17,776,961
)
(41,946
)
168,840
Comprehensive loss
Net loss
(12,294,325
)
(12,294,325
)
Foreign currency translation adjustment
(152,627
)
(152,627
)
Total comprehensive loss
(12,446,952
)
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
)
Accrued preferred dividends
(361,461
)
(361,461
)
BALANCES, MARCH 31, 2005
—
—
3,106,666
31,067
18,012,645
(30,071,286
)
(194,573
)
(12,222,147
)
Comprehensive loss
Net loss
(3,109,203
)
(3,109,203
)
Foreign currency translation adjustment
294,596
294,596
Total comprehensive loss
(2,814,607
)
Vesting of stock options as compensation
23,867
23,867
Accrued preferred dividends
(71,428
)
(71,428
)
BALANCE, JUNE 30, 2005 (unaudited)
—
$
—
3,106,666
$
31,067
$
17,965,084
$
(33,180,489
)
$
100,023
$
15,084,315
See accompanying notes to the consolidated financial statements.
F-5
Table of Contents
CASTLE BRANDS INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
Years Ended March 31,
June 30,
2003
2004
2005
2004
2005
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
(3,440,720
)
$
(6,423,977
)
$
(12,294,325
)
$
(3,605,456
)
$
(3,109,203
)
Adjustments to reconcile net loss to net cash used in operating
    activities
Depreciation and amortization
72,621
173,414
167,086
26,310
182,385
Minority interest in net loss of consolidated subsidiary
–
(35,339
)
(4,721
)
(2,065
)
(129,159
)
Loss on disposal of fixed assets
–
138,249
8,316
37,063
11,816
Write-off of deferred financing costs
89,796
94,098
387,698
122,224
103,094
Effect of changes in foreign currency rate
–
27,706
118,476
(3,247
)
(136,729
)
Changes in operations, assets and liabilities, net of effects of
    business acquisition in 2004
(Increase)/decrease in accounts receivable
(147,103
)
1,574,553
(1,775,404
)
(356,865
)
(1,030,374
)
Increase/(decrease) in due from related parties - GXB
–
–
(355,161
)
–
(19,423
)
(Increase in inventory
(444,491
)
(25,871
)
(1,569,612
)
(489,974
)
(220,758
)
Decrease/(increase) in prepaid expenses and supplies
11,345
35,416
51,615
(100,904
)
(343,894
)
(Increase)/decrease in other assets
(145,582
)
(85,678
)
(878,568
)
92,722
(25,357
)
Increase/(decrease) in accounts payable and accrued expenses
331,479
(283,330
)
1,705,730
1,313,710
529,795
(Decrease)/increase in due to related parties
–
(306,859
)
1,241,179
492,343
(336,042
)
Decrease in brand acquisition payable
(159,911
)
(255,879
)
–
–
–
Total adjustments
(391,846
)
1,050,480
(903,366
)
1,131,317
(1,414,646
)
NET CASH USED IN OPERATING ACTIVITIES
(3,832,566
)
(5,373,497
)
(13,197,691
)
(2,474,139
)
(4,523,849
)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment
(11,439
)
(47,443
)
(165,725
)
(22,460
)
(39,435
)
Acquisition of intangible assets
(9,626
)
(8,269
)
(25,988
)
(7,338
)
(39,168
)
Business acquisition - net of cash acquired
–
(6,667,105
)
(406,116
)
(426,985
)
(3,308
)
CASH USED IN INVESTING ACTIVITIES
(21,065
)
(6,722,817
)
(597,829
)
(456,783
)
(81,911
)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable
(3,190,394
)
(7,596,797
)
(6,694,880
)
(1,101,025
)
(989,180
)
Proceeds from notes payable and warrants
4,070,418
5,556,725
16,288,887
4,052,867
5,000,000
Payments of obligations under capital leases
–
(211,706
)
(1,823
)
–
(1,089
)
Increase in restricted cash
–
–
(377,828
)
–
–
Issuance of redeemable convertible preferred stock and warrants
3,249,170
21,500,005
7,500,000
–
–
Payments for cost of stock issuance
(209,546
)
(3,935,228
)
(705,522
)
–
(36,929
)
NET CASH PROVIDED BY FINANCING ACTIVITIES
3,919,648
15,312,999
16,008,834
2,951,842
3,972,802
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
66,017
3,216,685
2,213,314
20,920
(632,958
)
EFFECTS OF FOREIGN CURRENCY TRANSLATION
–
8,868
1,643
(405
)
(11,998
)
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
$
3,481,956
$
5,031,442
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
$
–
$
–
Investment in subsidiary
$
–
$
(9,824,710
)
$
–
$
–
$
–
Issuance of common stock in business acquisition
$
–
$
7,840,000
$
–
$
–
$
–
Debt issued in business acquisition
$
–
$
1,984,710
$
–
$
–
$
–
Interest paid
$
92,700
$
132,056
$
343,236
$
196,729
$
55,161
Income taxes paid
$
–
$
–
$
–
$
–
$
–
See accompanying notes to the consolidated financial statements.
F-6
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES
A.
Description of Business and Business
    Combination
– Castle Brands Inc. ("CBI"
    or "the Company") is the successor to Great Spirits
    Company, LLC, a Delaware limited liability company
    ("GSC"). The Company was formed in February 1998. In
    May 2003, Great Spirits Ireland, a wholly owned subsidiary of
    the Company began operations in Ireland to market the
    Company's products internationally. In July 2003, Castle
    Brands Inc. and Castle Brands (USA) Corp.
    ("CB-USA") were formed under the laws of Delaware in
    contemplation of a pending acquisition. On December 1,
    2003, CBI acquired The Roaring Water Bay Spirits Group Limited.
    and The Roaring Water Bay Spirits Marketing and Sales Company
    Limited. The acquisition has been accounted for under purchase
    accounting. Simultaneously, Great Spirits Company, LLC was
    merged into CB-USA, and the Company issued stock to GSC's
    shareholders in exchange for their shares of GSC. Subsequent to
    the acquisition, The Roaring Water Bay Spirits Group Limited
    ("RWB") was renamed Castle Brands Spirits Group
    Limited ("CB Group") and The Roaring Water Bay Spirits
    Marketing and Sales Company Limited was renamed Castle Brands
    Spirits Marketing and Sales Company Limited ("CB-UK").
The Company has experienced recurring operating losses and
    negative cash flows from operations and has a stockholders'
    equity (deficiency) of $12,222,147 as of March 31, 2005 and
    $15,099,275 as of June 30, 2005. In June of 2005, the
    Company raised $5 million from the sale of the second
    tranche of its convertible notes. In August 2005, the Company
    raised $2.9 million from the sale of Series C
    preferred stock and a further $5 million from a sale of
    convertible notes to a second investor. 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 June 30, 2006.
B.
Principles of Consolidation
-
The
    March 31, 2004 and 2005 consolidated financial statements
    include the accounts of CBI, its wholly-owned subsidiaries,
    CB-USA and its wholly-owned foreign subsidiaries, CB Group and
    CB-UK, and its majority owned Gosling-Castle Partners, Inc.
    hereafter collectively referred to as the "Company".
    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 three months ended June 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 three months
    ended June 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.
D.
Pro Forma Balance Sheet (unaudited)
– The
    Company's Board of Directors has authorized the filing of a
    registration statement with the Securities and Exchange
    Commission to register shares of its common stock in an initial
    public offering. If the initial public offering closed as
    presently anticipated in December 2005, all of the redeemable
    convertible preferred stock along with the related accrued
    dividends then outstanding would have converted into
F-7
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONT'D)
4,201,709 shares of common stock and the entire principal
    amount of the 5% Euro denominated convertible notes into
    263,362 shares of common stock and $6 million of the
    $15 million principal amount of the 6% convertible
    notes into 857,142 shares of common stock. The pro forma
    balance sheet (unaudited) at June 30, 2005 reflects the
    conversion of all outstanding redeemable convertible preferred
    stock and certain convertible notes payable into common stock as
    if such conversion had occurred at June 30, 2005.
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 consists 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 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,
    goodwill and other indefinite lived intangible assets that arose
    from acquisitions was $11.3 million and $11.8 million,
    respec-
F-8
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONT'D)
tively. 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.
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 deficit.
    Gains or losses resulting from foreign currency transactions are
    included in other income/expenses.
M.
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.
N.
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.
F-9
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONT'D)
O.
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 as of:
For the year then
For the quarter then
ended
ended
March 31,
March 31,
June 30,
June 30,
2004
2005
2004
2005
Net
    loss attributable to
    common                      stockholders,
    as reported
$
(6,981,906
)
$
(12,819,930
)
$
(3,691,844
)
$
(3,180,631
)
Stock-based
    compensation
    expense                      determined
    under fair value method
–
(370,068
)
–
–
Pro
    forma net loss attributable to common stockholders
$
(6,981,906
)
$
(13,189,998
)
$
(3,691,844
)
$
(3,180,631
)
Loss
    per share:
Basic
    and diluted - as reported
$
(3.12
)
$
(4.13
)
$
(1.19
)
$
(1.02
)
Basic
    and diluted - pro forma
$
(3.12
)
$
(4.25
)
$
(1.19
)
$
(1.02
)
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.
F-10
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONT'D)
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 123R beginning April 1, 2006. The Company expects
    that the adoption of FAS 123R 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 123R, 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 123R 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 4.4%; expected volatility 25%; and
    expected life of 7.2 years. The weighted average fair value
    of options granted in fiscal year 2004 and 2005 and for the
    three months ended June 30, 2005 was $2.17, $2.69 and $2.17,
    respectively.
P.
Research and Development Costs
-
The costs of
    research, development and product improvement are charged to
    expense as incurred.
Q.
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 $1,440,183
    and $1,068,575 the three months ended June 30, 2004 and
    2005, respectively.
R.
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.
S.
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 items such as to
    determine whether any impairment is to be recognized, allowance
    for doubtful accounts, depreciation, amortization and expense
    accruals.
NOTE 2 –
BASIC AND DILUTED NET LOSS
PER COMMON 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 2005 and 2004, no adjustment has been made to
    the weighted average outstanding common shares as the
F-11
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 2  –
BASIC AND DILUTED NET LOSS PER COMMON SHARE
    (CONT'D)
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,
June 30,
June 30,
2004
2005
2004
2005
Stock
    options
563,000
745,500
594,000
899,500
Stock
    warrants
207,118
390,493
295,993
498,618
Convertible
    debentures
3,540,180
888,375
263,299
1,513,160
Convertible
    preferred stock
4,573,513
3,741,965
2,804,465
3,741,965
Total
8,883,811
5,766,333
3,957,757
6,653,243
For the years ended March 31, 2003, the Company had issued
    100,000 warrants for membership interests in GSC to a lender.
Subsequent to June 30, 2005, the Company issued the
    following dilutive securities:
In July 2005 the Company entered into an agreement with an
    investor to issue $5,000,000 of convertible notes. These notes
    can convert into common stock at $8 per share (see
    Note 15).
In July 2005 in connection with the Series C Preferred
    Stock, the Company granted, to an advisor, warrants to acquire
    100,000 shares of the Company's common stock with an
    exercise price of $8.00. The Warrants are subject to
    anti-dilution provisions, vested immediately and are exercisable
    through December 31, 2009.
NOTE 3 -
INVENTORIES
March 31,
June 30,
2004
2005
2005
Inventories
    consist of:
Raw
    materials
$
903,320
$
1,154,942
$
1,600,631
Finished
    goods
2,793,289
4,342,036
3,829,445
Total
$
3,696,609
$
5,496,978
$
5,430,076
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.
F-12
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 4 -
INVESTMENTS AND
ACQUISITIONS
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
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 Group and CB-UK
On December 1, 2003, the Company acquired the
    CB Group, including 95% of its operating subsidiary CB-UK.
    CB Group is the producer and primary marketer of Boru
    Vodka, as well as Clontarf Irish Whiskey and several Irish cream
    liqueurs. CB-UK is the marketing company that operates primarily
    in Great Britain. As part of the acquisition, in May 2004,
    CB Group purchased the remaining shares of its operating
    subsidiary from minority shareholders
F-13
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 4 -
INVESTMENTS AND ACQUISITIONS
(CONT'D)
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 Group 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) including $1,154,863 of acquisition
    costs consisting of investment banking and legal fees, was
    $17,048,946, which consisted of cash of $6,097,079,
    1,306,666 shares of the Company's common stock with a
    fair value of $7,840,000, $1,650,800 in convertible subordinated
    notes payable and $306,204 of other notes payable. The cash
    portion of the acquisition was financed with proceeds from the
    issuance of $16,550,000 of Series C convertible preferred
    stock.
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.
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
11,756,051
Total
    consideration
$
17,631,236
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.
On December 1, 2003, the Company has 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
F-14
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 4 -
INVESTMENTS AND ACQUISITIONS
(CONT'D)
tangible and intangible assets, the additional value ascribed
    above those fair values was recorded as additional goodwill.
The changes in the carrying amount of goodwill for the years
    ended March 31, 2005 and 2004 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
450,120
Balance
    as of March 31, 2005
11,756,051
Other
3,308
Balance
    as of June 30, 2005
$
11,759,359
The results of CB Group and CB-UK have been included in the
    consolidated financial statements since the date of acquisition.
    Unaudited pro forma results of operations for the year ended
    March 31, 2004 are included below. Such pro forma
    information assumes that the acquisition had occurred as of
    April 1, 2003.
March 31, 2004
Net
    sales
$
8,637,596
Gross
    profit
$
3,513,800
Net
    loss
$
(6,539,200
)
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.
F-15
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 5 -
EQUIPMENT
Equipment consists of the following as of:
March 31,
March 31,
June 30,
2004
2005
2005
Equipment
    and software
$
465,049
$
670,927
$
683,466
Transportation
    equipment
42,933
–
–
Furniture
    and fixtures
26,032
27,942
18,602
Leasehold
    improvements
–
4,733
4,733
534,014
703,602
706,801
Less:
    accumulated depreciation
275,568
353,463
370,712
$
258,446
$
350,139
$
336,089
Depreciation expense for the years ended March 31, 2003,
    2004, and 2005 and for the three months ended June 30, 2004
    and 2005 totaled $6,904, $47,771, $81,724, and $12,560 and
    $27,856, respectively.
NOTE 6 -
INTANGIBLE ASSETS
Intangible assets consist of the following as of:
March 31,
March 31,
June 30,
2004
2005
2005
Brands,
    trademarks and rights
$
1,086,043
$
9,128,814
$
9,146,159
Other
    identifiable intangible assets
5,665,000
5,665,000
5,665,000
6,751,043
14,793,814
14,811,159
Less:
    accumulated amortization
303,503
318,698
459,478
Total
$
6,447,540
$
14,475,116
$
14,351,681
The identifiable intangible assets consist of a patent, trade
    names and formulations of the various products and distribution
    and supplier relationships.
Amortization expense for the years ended March 31, 2003,
    2004, and 2005 and the three months ended June 30, 2004 and
    2005 totaled $100,620, $90,829 and $85,362, $13,750 and $154,530
    respectively.
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 then the
    carrying amount of the asset, an impairment loss is recognized
    based on the fair value of the asset.
NOTE 7 -
RESTRICTED CASH
In connection with the credit facilities as described in
    notes 8 and 9, personal guarantees of the two former
    managing directors of CB Group 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
F-16
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 7 -
RESTRICTED CASH
    (CONT'D)
$361,993 (as translated at the exchange rate in effect on
March 31, 2005 and June 30, 2005, respectively).
NOTE 8 -
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following
    as of:
March 31,
2004
March 31,
June 30,
2005
2005
Accou
    payable
nts $
1,885,034
$
2,785,179
$
3,177,456
Accru
    expenses
ed 981,774
1,897,338
1,786,218
Total
$
2,866,808
$
4,682,517
$
4,963,674
CB Group and CB-UK maintain overdraft coverages with a
    financial institution in Ireland of up to
€
400,000
    ($508,000) and £20,000 ($16,400), respectively. Overdarft
    balances are included in accounts payable for the periods
    presented.
NOTE 9 -
NOTES PAYABLE AND CAPITAL
LEASE
March 31
March 31
June 30
2004
2005
2005
Notes payable consist of the following as of:
The Company has arranged revolving credit facilities aggregating
    approximately
€
1,677,000
    ($2,175,000) 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
€
295,000
    ($382,000) 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
$
1,254,508
The Company has arranged revolving credit facilities aggregating
    approximately £242,000 ($457,000). 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
256,915
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Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 9 -
NOTES PAYABLE AND CAPITAL
LEASE (CONT'D)
March 31
March 31
June 30
2004
2005
2005
Notes payable consist of the following as of:
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 Group, the Company issued to the former minority
    shareholders of CB Group
€
255,000
    ($331,000) 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
307,683
F-18
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 9 -
NOTES PAYABLE AND CAPITAL
LEASE (CONT'D)
March 31
March 31
June 30
2004
2005
2005
Notes payable consist of the following as of:
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 matured 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 original
    term of the notes with an original maturity of May 2007.
–
4,561,472
4,570,706
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Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 9 -
NOTES PAYABLE AND CAPITAL
LEASE (CONT'D)
March 31
March 31
June 30
2004
2005
2005
Notes payable consist of the following as of:
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. 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. 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
    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.
–
5,000,000
10,000,000
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
1,775,407
Total
$
1,931,319
$
14,256,058
$
18,165,219
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 June 30, 2005, the
F-20
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 9 -
NOTES PAYABLE AND CAPITAL
LEASE (CONT'D)
Company owed $16,000 and $14,909, respectively, under this
    lease. Future minimum lease payments equal $17,872 including
    interest.
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 ending
March 31,
Amount
2006
$
3,032,383
2007
1,224,696
2008
30,335
2009
341,498
2010
9,661,665
Total
14,290,577
Less current portion
3,032,383
Non current portion
$
11,258,194
NOTE 10 -
SHAREHOLDER
NOTES PAYABLE
In connection with the Company's acquisition of CB Group,
€
444,389
    ($576,372) of subordinated notes were issued by CB Group in
    substitution of subordinated notes of the same amount originally
    issued on April 1, 2001 by CB Group. 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 three
    months ended June 30, 2005, the Company recorded interest
    expense on these notes of $6,360, $19,311, and $4,832,
    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,
Amount
2006
$
172,200
2007
172,200
Total
$
344,400
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Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 10 -
SHAREHOLDER NOTES PAYABLE
(CONT'D)
In connection with the acquisition of CB Group and CB-UK in
    December 2003, the former principal shareholders received
€
1,374,750 of
    convertible subordinated notes in partial consideration for
    their shares in CB Group 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
    June 30, 2005, the Company was indebted in the amount of
    $1,775,627 and $1,658,773, respectively, on the notes (as
    translated at the exchange rate in effect on March 31, 2005
    and June 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. 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 RWB, issued
    1,306,666 shares of common stock in partial payment of the
    acquisition (See Note 4). At March 31, 2004 and 2005
    and June 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,
June 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
F-22
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 12 -
REDEEMABLE CONVERTIBLE PREFERRED STOCK
    (CONT'D)
March 31,
June 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 3,006,250 shares
    issued and outstanding at March 31, 2005 and June 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
24,050,000
24,050,000
(See Note 15 for consideration given to warrant beneficial
    conversion features)
Total
$
21,500,005
$
29,000,005
$
29,000,005
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 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 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 initial public offering of
    $10 million or more.
F-23
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 12 -
REDEEMABLE CONVERTIBLE PREFERRED STOCK
    (CONT'D)
In August 2003, Great Spirits LLC completed an offering of
    535,715 shares of Series A preferred stock. In
    December 2003, this issue was exchanged for comparable CBI
    Series A preferred stock is convertible into common shares
    at $7 per share at the option of the holder or in an
    automatic conversion upon initial public offering of
    $10 million or more.
In December, 2003, CBI raised $16,525,000 issuing
    2,065,625 shares of Series C preferred stock in
    conjunction with the RWB acquisition. 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
    initial public offering of $10 million or more.
In January 2004, CBI raised $25,000 issuing 3,125 shares of
    Series C preferred stock.
In November 2004, CBI raised $5,001,178, less $184,434 in
    financing charges, issuing 625,147 shares of Series C
    preferred stock.
In December 2004, CBI raised $888,400, less $86,845 in financing
    charges, issuing 111,050 shares of Series C preferred
    stock.
In February 2005, CBI raised $1,000,000, less $20,000 in
    financing charges, issuing 125,000 shares of Series C
    preferred stock.
In March 2005, CBI raised $610,422, less $15,958 in financing
    charges, issuing 76,303 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 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. 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 three months ended June 30, 2005, dividends of
    $319,819, $681,280 and $767,668 in arrears, respectively, remain
    unpaid.
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,
F-24
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 12 -
REDEEMABLE CONVERTIBLE PREFERRED STOCK
    (CONT'D)
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 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 $24,050,000, respectively. As of June 30,
    2005, the liquidation preference of the Series A,
    Series B and Series C preferred stock are equal to
    $4,319,755, $1,397,918 and $24,050,000, 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
    June 30, 2005, the Company held outstanding forward
    exchange positions for the purchase of Euros, expiring through
    December 2005, in the amount of $798,476 with a weighted average
    conversion rate of
€
1 = $1.2730 as
    compared to the spot rate at June 30, 2005 of
€
1 = $1.2066.
    Gain or loss on foreign transactions is included in other income
    and expense.
F-25
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 14 -
PROVISION FOR INCOME TAXES
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 carryforwards of approximately $10,120,000 for
    U.S. tax purposes, which expire in 2025 and foreign net
    operating loss carryforwards of approximately $7,080,000 which
    carryforward without limit of time.
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
    June 30, 2005.
The following table reconciles the income tax (benefit) expense
    and the federal statutory rate of 34%.
For the
year ended
March 31,
2004
2005
%
%
Computed expected tax benefit, at 34%
34.00
34.00
Increase in valuation allowance
(23.73
)
(29.70
)
Effect of foreign rate differential
(11.08
)
(8.61
)
Non-deductible interest expense
(5.19
)
(1.69
)
Other
6.00
6.00
State and local taxes, net of federal benefit
–
–
On December 1, 2003, the Company has 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
    purchse prict to the distribution agreement, the additional
    value ascribed above the fair value was recorded as additional
    goodwill.
In connection with the investment in GCP, 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 quarter ended
    June 30, 2005, the Company has recognized $0, $0 and
    $37,037 of deferred tax benefit.
F-26
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
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,
June 30,
2004
2005
2005
Deferred income tax asset
Foreign currency transactions
$
54,000
$
92,000
$
36,000
Amortization of intangibles
250,000
296,000
282,000
Net operating loss carryforwards – U.S.
852,000
4,062,000
4,844,000
Net operating loss carryforwards – foreign
301,000
730,000
756,000
Other
14,000
–
–
Total gross assets
1,471,000
5,180,000
5,918,000
Less: Valuation allowance
(1,471,000
)
(5,180,000
)
(5,918,000
)
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
)
(2,185,185
)
Net deferred income taxes
$
(629,444
)
$
(2,851,666
)
$
(2,814,629
)
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 June 30, 2005 was approximately
    $1,471,000, $5,180,000 and $5,918,000 respectively. The net
    change in the total valuation allowance for the years ended
    March 31, 2003, 2004 and 2005 and the three months ended
    June 30, 2005, was $0, $1,471,000, and $3,709,000, and
    $815,000, 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 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
F-27
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 15 -
STOCK OPTIONS AND WARRANTS (CONT'D)
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 Group 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 stock option plan is as follows:
Year Ended March 31,
Three Months
Ended
2004
2005
June 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
248,500
7.17
150,000
8.00
Forfeited
—
—
(66,000
)
6.00
—
—
Outstanding at end of year
563,000
6.00
745,500
6.47
895,500
6.75
Options exercisable at year end
—
$
6.00
174,533
$
6.36
174,533
$
6.36
Weighted average fair value of options granted during the year
$
2.17
$
2.69
$
2.17
F-28
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
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
563,000
$
6.00
8.88
143,533
$
6.00
182,500
8.00
9.83
31,000
8.00
745,500
174,533
As of June 30, 2005, the total stock options outstanding
    was 895,500. The weighted average exercise price of these
    options was $6.73. The weighted average remaining life of these
    options was 8.95 years. Total stock options exercisable as
    of June 30, 2005 was 174,532. The weighted average exercise
    price of these options was $6.35.
The fair value of options at date of grant was estimated using
    the Black-Scholes option-pricing model utilizing the following
    assumptions:
March 31,
June 30,
2004
2005
2005
Risk-free interest rates
4.38%
4.38-4.59%
3.8%
Expected options life in years
6.42-6.50
6.83-7
6.42
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 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 if the Company elects to file a registration statement
    then 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 value assigned to the warrants was recorded as a reduction
    in the value assigned to the credit facility (discount amount)
    and an increase in long-term liabilities. The discount amount of
    $282,295 was accreted over the three-year life of the credit
    facility as additional interest
F-29
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 15 -
STOCK OPTIONS AND WARRANTS (CONT'D)
expense. The Company has recorded interest expense for the years
    ended March 31, 2003, 2004 and 2005 and the three months
    ended June 30, 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 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.
In addition, the warrants issued in connection with the credit
    facility have a put right. Commencing September 1, 2006,
    the put may be exercised by the holder at any time prior to the
    expiration date. The holder may require the Company to purchase
    in whole or in part, for an amount equal to the number of shares
    as to which the holder is exercising 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 put right. The Company shall pay the put amount
    in immediately available funds on the date set; provided
    however, that if the put amount is greater than $300,000, the
    Company shall pay at least $300,000 on such date and shall have
    the option to pay the remainder of the put amount in four equal
    installments due at the end of each fiscal quarter thereafter,
    and bear interest at the prime rate as published by The Wall
    Street Journal, or in the event that The Wall Street Journal is
    not available at any time, such rate published in another
    publication as determined by the holder plus two hundred fifty
    (250) basis points per annum, or seven percent, or LIBOR
    plus (500) basis points.
Common Stock Warrants Issued to the Placement Agents
In connection with the Series C Preferred Stock, the
    Company granted, to the placement agents, warrants to acquire
    approximately 173,993 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 are
    exercisable through December 31, 2009. The Company is not
    obligated to register the warrants or the underlying shares,
    except to the extent if the Company elects to file a
    registration statement then 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.
F-30
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 15 -
STOCK OPTIONS AND WARRANTS (CONT'D)
The proceeds upon issuance of the Series C Preferred Stock
    were allocated as follows:
Face value of Preferred Stock
$
16,550,000
Beneficial conversion feature
(417,214
)
Relative fair value of preferred stock
$
16,132,786
The beneficial conversion feature 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
    Preferred Stock were convertible in accordance with the Emerging
    Issues Task Force ("EITF") Issue No. 00-27. The
    beneficial conversion feature 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 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 fair 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
    three months ended June 30, 2004 and 2005, the Company
    recorded $0, $0, and $30,668 and $2,697 and $9,232 of senior
    note accretion as additional interest expense.
F-31
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
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
Exercised
–
–
Forfeited
–
–
Warrants
    outstanding and exercisable, June 30, 2005
390,493
7.49
NOTE 16 -
RELATED PARTY TRANSACTIONS
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 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,
F-32
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 16 -
RELATED PARTY TRANSACTIONS
(CONT'D)
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 three months ended June 30,
    2004 and 2005, aggregate charges recorded for all services
    provided were approximately $61,518, $84,450 and $121,393, and
    $21,327 and $52,054, 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 three months ended
    June 30, 2004 and 2005, fees incurred by the Company to
    Knappogue Corp. amounted to $28,009, $33,000, and $18,620, and
    $3,000 and $7,540, respectively.
C.
Prior to the acquisition of CB Group, the Company purchased
    inventory from CB Group of approximately $737,000 pursuant
    to a 2001 distribution agreement. In addition, for the years
    ended March 31, 2003, 2004 and 2005, and the three months
    ended June 30, 2004 and 2005, the Company made payments to
    CB Group 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 agreement 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 three
    months ended June 30, 2005, BPW, Ltd. was paid $41,802 and
    $10,500, respectively, under this contract.
E.
For the years ended March 31, 2004 and 2005, and the three
    months ended June 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 approximately $595,250 and
    $2,501,600, and $637,000 and $529,000, 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 June 30, 2004 and 2005, the Company was
    indebted to these two shareholders approximately $348,000 and
    $369,000 and $839,000 and
F-33
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 16 -
RELATED PARTY TRANSACTIONS
(CONT'D)
$385,000, 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 three
    months ended June 30, 2004 and 2005, the Company made
    payments of approximately $25,000 and $37,500, and $9,000 and
    $9,500, 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 Group whereby,
    effective March 11, 2005 and October 1, 2005,
    respectively, these individuals resigned their positions and
    directorships in CB Group 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
    $160,901, at March 31 and June 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 three months ended June 30, 2005, the Company made payments
    of $20,000 and $60,059, respectively pursuant to this agreement.
NOTE 17 -
COMMITMENTS AND
CONTINGENCIES
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.
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
F-34
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 17 -
COMMITMENTS AND CONTINGENCIES
(CONT'D)
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).
E.
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.
F.
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
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 $290,000, $70,000 and $60,000
    and $90,000 and $50,000 for the years ended March 31, 2005,
    2004 and 2003, and the three months ended June 30, 2005 and
    2004, respectively.
G.
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
F-35
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 17 -
COMMITMENTS AND CONTINGENCIES
(CONT'D)
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.
H.
The Company is subject to strict federal and state government
    regulations associated with the marketing, import, warehouse,
    transport, and distributions of spirits.
NOTE 18 -
CONCENTRATION OF CREDIT
RISK
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 June 30, 2004 and 2005, the Company exceeded the
    insured limit by approximately $6,100,000 and $5,700,000, and
    $2,400,000 and $5,100,000, 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 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 three months
    ended June 30, 2005, the Company recognized interest
    expense of $6,640 and $20,000, respectively, on this note.
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
F-36
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 19 -
GOSLING-CASTLE PARTNERS INC. EXPORT AGREEMENT WITH
    GOSLING'S EXPORT (BERMUDA) LIMITED
    (CONT'D)
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.
NOTE 20 -
SUBSEQUENT EVENTS
In connection with the Company's 2005 agreement to issue up
    to $10,000,000 of subordinated convertible notes to an investor
    in order to fund Gosling-Castle Partners, Inc. and for working
    capital purposes, of which $5,000,000 of notes were issued as of
    March 31, 2005, the Company issued the remaining $5,000,000
    of convertible note in June 2005.
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. 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 such discount based on the level of interest savings to the
    Company.
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, it is anticipated that the value of the
    incremental shares, valued at the initial public offering price,
    will be recorded as interest expense.
In August 2005, the Company issued 362,500 shares of
    Series C Preferred Stock, convertible at $8 per share
    and raised $2.9 million in cash.
In August 2005, the Company modified its senior note indenture
    to increase issuable notes to $10 million, extend the term
    two years until May 2009 and to increase the interest rate from
    8% to 9%.
On August 15, 2005, the Company, for prior services,
    authorized the issuance to a financial advisor a warrant to
    purchase up to 100,000 shares of common stock at $8.00 per share
    for a period of ten years.
F-37
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 20 -
SUBSEQUENT EVENTS
(CONT'D)
The warrant issued on December 1, 2003 in connection with
    the Company's revolving credit facility (See Note 15,
    B., above) was subsequently amended to amend the warrant
    holder's registration rights with respect to the
    Company's initial public offering, eliminate a cash put to
    the Company and provide certain penalties if the shares
    underlying the warrants have not been registered by June 2007
    and June 2008.
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 and issue options to purchase
    20,000 shares of its common stock to employees of GCP.
In connection with our amended and restated warrant agreement
    with Keltic Financial Partners, LP for the purchase of 100,000
    shares of our common stock, we have 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) we have not
    filed a registration statement with respect to which Keltic had
    the opportunity to register the unregistered shares, we shall
    pay Keltic $100,000 within ten (10) days of such date.
NOTE 21 -
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
Three
Months Ended
March 31
March 31
March 31
June 30
2003
%
2004
%
2005
%
2005
%
Consolidated Revenue:
Ireland, United Kingdom and Canada
$
603,596
25.0%
$
1,995,000
41.3%
$
5,891,000
46.7%
$
1,651,181
36.7%
United States
1,815,466
75.0%
2,831,919
58.7%
6,726,863
53.3%
2,847,292
63.3%
Total Consolidated Revenue
$
2,419,062
100%
$
4,826,919
100%
$
12,617,863
100%
$
4,498,473
100%
Consolidated Assets:
Ireland & United Kingdom
$
698,246
2.5%
$
3,032,000
10.9%
$
4,823,000
11.2%
$
5,521,615
12.6%
United States
26,924,680
97.5%
24,726,832
89.1%
38,432,009
88.8%
38,433,554
87.4%
Total Consolidated Assets
$
27,622,926
100%
$
27,758,832
100%
$
43,255,009
100%
$
43,955,169
100%
F-38
Table of Contents
CASTLE BRANDS INC. AND SUBSIDIARIES
Notes to Financial Statements
Fiscal Years Ended March 31, 2003, 2004 and 2005
Unaudited with Respect to June 30, 2004 and 2005
NOTE 22 -
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.
F-39
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
(formerly known as The Roaring Water Bay Spirits Company
Limited)
Directors' Report and Financial Statements
Year Ended 31 December 2003
Registered number    274814
F-40
CASTLE BRANDS SPIRITS COMPANY LIMITED
Directors' Report and Financial Statements
Contents
Page
Directors' report
F-42
Statement of directors'
    responsibilities
F-44
Auditors' report
F-45
Statement of accounting policies
F-47
Profit and loss account
F-49
Balance sheet
F-50
Cash flow statement
F-51
Notes on and forming part of the financial
    statements
F-52
F-41
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Directors' Report
The directors present their annual report and audited financial
statements for the year ended 31 December 2003.
Principal activities, business review and future
developments
The principal activity of the company is the manufacture and
development of a range of Irish spirit brands for the Irish and
International markets. These include Boru Vodka, Clontarf Irish
Whiskey and O'Leary's Irish Cream.
Castle Brands Spirits Company Limited is a subsidiary of Castle
Brands Spirits Group Limited, a company registered in Ireland,
having its registered office at 4 Herbert Place, Herbert
Street, Dublin 2.
The Boru Vodka Company Limited, The Clontarf Irish Whiskey
Company and Castle Brands Whiskey Company Limited are wholly
owned subsidiaries of the company. All of the companies are
dormant and have their registered offices at 4 Herbert
Place, Herbert Street, Dublin 2.
On 1 December, 2003 all of the issued share capital of the
parent company, Castle Brands Spirits Group Limited, was
acquired by Castle Brands Inc. a Delaware corporation.
The company changed its name from The Roaring Water Bay Spirits
Company Limited to Castle Brands Spirits Company Limited with
effect from 28 January 2004.
Results and dividends
The profit and loss account, balance sheet and cash flow
statement for the year ended 31 December 2003 are set out
on pages F-49 to F-51.
€
The loss for the financial year amounted to
(46,887
)
Profit and loss account at beginning of year
(582,288
)
Profit and loss account at end of year
(629,175
)
The directors do not recommend payment of a final dividend.
Post balance sheet events
There have been no significant events since the year end, which
would have an impact on the financial position at
31 December 2003.
Future developments
The directors are confident about the coming year, with a number
of exciting developmental opportunities in new and existing
markets that will deliver sustained organic growth for the
company.
Interests of directors and secretary
The interests of the directors and the secretary of the company
who are also directors of the ultimate parent undertaking,
Castle Brands Inc., in the shares of Castle Brands Inc. are
stated in the financial statements of that company.
Health and safety of employees
It is the policy of the company to ensure the health and welfare
of employees by maintaining a safe place and system of work.
This policy is based on the requirements of employment
legislation, including the Safety, Health and Welfare at Work
Act, 1989.
F-42
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Directors' Report
Books of account
The measures taken by the directors to ensure compliance with
the requirements of Section 202, Companies Act, 1990,
regarding proper books of account are the implementation of
necessary policies and procedures for recording transactions,
the employment of competent accounting personnel with
appropriate expertise and the provision of adequate resources to
the financial function. The books of account are maintained at
4 Herbert Place, Herbert Street, Dublin 2.
Auditors
The auditors, BDO Simpson Xavier, Registered Auditors, have
indicated their willingness to continue in office in accordance
with the provisions of Section l60(2) of the Companies Act,
1963.
On behalf of the board:
/s/  Patrick Rigney
/s/  David Phelan
Patrick Rigney
Director
David Phelan
Director
Date June 2, 2004
F-43
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Statement of Directors' Responsibilities
Irish company law requires the directors to prepare financial
statements for each financial period which give a true and fair
view of the state of affairs of the company and of the profit or
loss for that period. In preparing those financial statements,
the directors are required to:
•
select suitable accounting policies and then apply them
    consistently
•
make judgements and estimates that are reasonable and prudent
•
prepare the financial statements on the going concern basis
    unless it is inappropriate to presume that the company will
    continue in business
The directors are responsible for keeping proper books of
account which disclose with reasonable accuracy at any time the
financial position of the company and to enable them to ensure
that the financial statements are prepared in accordance with
accounting standards generally accepted in Ireland and comply
with the Companies Acts, 1963 to 2003. They have general
responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the company and to prevent and
detect fraud and other irregularities.
On behalf of the board:
/s/ Patrick Rigney
/s/ David Phelan
Patrick Rigney
Director
David Phelan
Director
Date June 2, 2004
F-44
Table of Contents
Independent Auditors' report to the members of Castle
Brands Spirits Company Limited
We have audited the financial statements on pages F-47 to F-64
which comprise the Profit and Loss Account, the Balance Sheet,
the Cash Flow Statement and related notes. These financial
statements have been prepared under the historical cost
convention and in accordance with the accounting policies set
out on pages F-47 to F-48.
Respective responsibilities of directors and auditors in
relation to the financial statements
The directors are responsible for preparing the annual report.
As described on page F-44, this includes responsibility for
preparing the financial statements in accordance with accounting
standards generally accepted in Ireland. Our responsibilities,
as independent auditors, is to audit the financial statements in
accordance with relevant legal and regulatory requirements and
generally accepted auditing standards in Ireland and the United
States of America.
We report to you our opinion as to whether the financial
statements are presented fairly, in all material respects, and
are properly prepared in accordance with the Companies Acts. We
also report to you whether in our opinion: proper books of
account have been kept by the company; whether, at the balance
sheet date, there exists a financial situation which may require
the convening of an extraordinary general meeting of the
company; and whether the information given in the
directors' report is consistent with the financial
statements. In addition, we state whether we have obtained all
the information and explanations necessary for the purposes of
our audit and whether the financial statements are in agreement
with the books of account.
We report to you, if, in our opinion, any information specified
by law regarding directors' remuneration and
directors' transactions is not given and, where
practicable, include such information in our report.
We read the other information contained in the annual report and
consider whether it is consistent with the audited financial
statements. We consider the implications for our report if we
become aware of any apparent misstatements or material
inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with generally accepted
auditing standards in Ireland and the United States of America.
An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant
estimates and judgements made by the directors in the
preparation of the financial statements, and of whether
F-45
Table of Contents
Independent Auditors' report to the members of Castle
Brands Spirits Company Limited (Continued)
the accounting policies are appropriate to the company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion, the financial statements referred to above
present fairly, in all material respects, the state of affairs
of the company at 31 December 2003 and 31 December
2002 and of the results for each of the years then ended and
have been properly prepared in accordance with the Companies
Acts, 1963 to 2003 and all Regulations to be construed as one
with those acts.
We have obtained all the information and explanations we
considered necessary for the purposes of our audit. In our
opinion, proper books of account have been kept by the company.
The financial statements are in agreement with the books of
account.
In our opinion, the information given in the directors'
report on pages F-42 and F-43 is consistent with the
financial statements.
The net assets of the company, as stated in the balance sheet on
page F-50, are more than half of the amount of its called
up share capital and, in our opinion, on that basis there did
not exist at 31 December 2003 a financial situation which,
under Section 40(1) of the Companies (Amendment) Act, 1983,
may require the convening of an extraordinary general meeting of
the company.
/s/ BDO Simpson Xavier
BDO Simpson Xavier
Date
3rd June 2004
Registered Auditors
Dublin, Ireland
F-46
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Statement of Accounting Policies
For the Year Ended 31 December 2003
The following accounting policies have been applied consistently
in dealing with items which are considered material in relation
to the company's financial statements.
Basis of preparation
The financial statements have been prepared on a going concern
basis under the historical cost convention and comply with the
requirements of Irish statute comprising the Companies Acts,
1963 to 2003, and with financial reporting standards of the
Accounting Standards Board, as promulgated by the Institute of
Chartered Accountants in Ireland.
Turnover
Turnover, all of which arises from continuing operations,
represents the value of goods and services at invoice value,
exclusive of excise duty, value added tax and trade discounts,
and inclusive of royalty income.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost, less accumulated
depreciation. The charge for depreciation is calculated to write
down the cost of tangible fixed assets to their estimated
residual values by equal annual installments over their expected
useful lives, which are as follows:
Buildings
25 years
Plant and equipment
7 years
Office equipment
4 years
Computer equipment
4 years
Motor vehicles
4 years
lntangible assets
Intangible assets represent patents and internally developed
trademarks. The directors have elected to amortise intangible
assets over a useful economic life of five years.
Deferred development expenditure
Expenditure for Boru Vodka, Clontarf Whiskey and
O'Leary's Cream brands, design, product development,
market research, copyright, trademarks, patents, organization
and tooling has been deferred and is amortised over a period of
five years.
Financial assets
Investments in subsidiary undertakings
Investments in subsidiary undertakings are carried at cost less
provisions for impairments in value.
Stock and work in progress
Stocks are stated at the lower of cost and net realisable value.
Cost comprises purchase price, including freight and duty, and
in the case of work in progress and finished goods, all directly
related production overheads. Net realisable value comprises
estimated sales value less all further costs to completion and
further marketing, selling, and distribution costs.
F-47
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Statement of Accounting Policies
For the Year Ended 31 December 2003
Foreign currencies
The financial statements are expressed in Euro
(
€
).
Transactions in foreign currencies are recorded at the rate
ruling at the date of the transaction or at a contracted rate.
The resulting monetary assets and liabilities are translated at
the balance sheet rate or the contracted rate and the exchange
differences are dealt with in the profit and loss account.
Taxation
The charge for taxation is based on the profit or loss for the
year.
Deferred taxation is accounted for in respect of timing
differences between profit as computed for taxation purposes and
profit as stated in the financial statements to the extent that
such differences are expected to reverse in the foreseeable
future.
Leased assets
Assets obtained under hire purchase contracts and finance leases
are capitalised as tangible assets and depreciated over the
shorter of the lease term and their useful lives. Obligations
under such agreements are included in creditors net of finance
charge allocated to future periods. The interest element of the
rental payment is charged to the profit and loss account so as
to produce a constant periodic rate of charge.
Rentals payable under operating leases are charged against
income on a straight line basis over the lease term.
Pensions
The company operates a defined contribution pension scheme.
Contributions to the scheme are expensed as incurred.
Government grants
Revenue based grants are credited to the profit and loss account
to offset the matching expenditure in the period to which they
belong.
Grants that relate to specific capital expenditure are treated
as deferred income, which is then credited to the profit and
loss account over the related asset's useful life.
Media production
The fixed costs of media production are deferred over a period
of three years which is the expected useful life of the
production.
Consolidation
The company is a subsidiary of an EU parent and is therefore
exempt from the requirement to prepare consolidated financial
statements by virtue of Regulation 9 of the European Communities
(Companies: Group Accounts) Regulations, 1992. Consequently
these financial statements deal with the results of the company
as a single entity.
F-48
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
PROFIT AND LOSS ACCOUNT
For the Year Ended 31 December 2003
Note
2003
2002
€
€
Turnover
1
5,569,866
6,726,551
Cost of sales
(2,848,965
)
(3,012,243
)
Gross profit
2,720,901
3,714,308
Administration expenses
(1,297,409
)
(1,542,813
)
Selling and distribution expenses
(1,362,634
)
(2,013,716
)
Operating profit
60,858
157,779
Interest payable and similar charges
2
(99,945
)
(111,360
)
(Loss)/profit on ordinary activities before taxation
3
(39,087
)
46,419
Tax on (loss)/profit on ordinary activities
4
(7,800
)
24,829
(Loss)/profit for the financial year
(46,887
)
71,248
Profit and loss account at beginning of year
(582,288
)
(653,536
)
Profit and loss account at end of year
(629,175
)
(582,288
)
The company had no recognised gains or losses for the year or
prior year, other than the loss noted in the profit and loss
account.
There is no material difference between the loss on ordinary
activities before taxation and the retained loss reported in the
profit and loss account and the equivalent figures calculated on
the historical cost basis.
The accompanying notes form an integral part of this profit and
loss account.
On behalf of the board:
/s/ Patrick Rigney
/s/ David Phelan
Patrick Rigney
David Phelan
Director
Director
Date June 2, 2004
F-49
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
BALANCE SHEET
At 31 December 2003
Note
2003
2002
€
€
€
€
Fixed assets
6
271,680
372,646
Tangible assets
7
24,215
34,562
Intangible assets
8
107,564
140,547
Deferred development expenditure
9
9
9
Financial assets
403,468
547,764
Current assets
Stocks
10
882,057
887,258
Debtors
11
3,166,138
3,442,843
Cash at bank and in hand
229,564
60,111
4,277,759
4,390,212
Creditors:
amounts falling due within one year
12
(3,328,775
)
(3,280,706
)
Net current assets
948,984
1,109,506
Total assets less current liabilities
1,352,452
1,657,270
Creditors:
amounts falling due after one year
13
(632,986
)
(895,088
)
Deferred income
15
(7,593
)
(10,192
)
Provisions for liabilities and charges
16
(6,770
)
—
705,103
751,990
Financed by:
Capital and reserves
Called up share capital
17
771,274
771,274
Capital conversion reserve
18
7,127
7,127
Share premium
18
555,877
555,877
Profit and loss account
18
(629,175
)
(582,288
)
Shareholders' funds
19
705,103
751,990
The accompanying notes from an integral part of this balance
sheet.
On behalf of the board.
/s/ Patrick Rigney
/s/ David Phelan
Patrick Rigney
David Phelan
Director
Director
Date June 2, 2004
F-50
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
CASH FLOW STATEMENT
For the Year Ended 31 December, 2003
Note
2003
2002
€
€
Net cash inflow/(outflow) from operating activities
22
559,892
(474,948
)
Servicing of finance and returns on investments
23
(99,945
)
(111,360
)
Taxation
23
24,249
(62,907
)
Capital expenditures and financial investment
23
(77,502
)
(124,819
)
Net cash inflow/(outflow) before use of liquid resources and
    financing
406,694
(774,034
)
Financing
23
(99,987
)
878,120
Increase in cash
306,707
104,086
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
For the Year Ended 31 December, 2003
Note
2003
2002
€
€
Increase in cash
24
306,707
104,086
Decrease/(increase) in net debt
99,987
(623,120
)
Movement in net debt during the period
406,694
(519,034
)
Net (debt) at beginning of year
24
(2,178,125
)
(1,659,091
)
Net (debt) at end of year
24
(1,771,431
)
(2,178,125
)
F-51
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 1 -
TURNOVER
Turnover is derived entirely from the sale of alcoholic spirits
    in Ireland and abroad, and includes royalty income from Great
    Spirits Company LLC, a distributor of the products of Castle
    Brands Spirits Company Limited.
NOTE 2 -
INTEREST PAYABLE AND SIMILAR
CHARGES
2003
2002
€
€
Bank
    interest and charges
85,179
99,893
Finance
    lease interest
14,766
11,467
99,945
111,360
NOTE 3 -
STATUTORY AND OTHER
INFORMATION
2003
2002
€
€
Auditors'
    remuneration, including expenses
17,500
17,500
Directors'
    remuneration and other emoluments
184,158
170,596
Government
    grants received
-
(40,502
)
Depreciation
    and amortisation of:
Owned
    tangible fixed assets
52,041
49,242
Leased
    tangible fixed assets
63,299
67,634
Deferred
    development expenditure
88,677
77,538
Intangible
    assets
17,781
16,295
Media
    production
-
70,344
Capital
    grants received
(2,599
)
(2,681
)
NOTE 4 -
TAX ON PROFIT ON ORDINARY
ACTIVITIES
2003
2002
€
€
Overprovision
    from previous year
-
(24,829
)
Deferred
    tax
6,770
-
Tax
    credit on medical insurance repayable
1,030
-
7,800
(24,829
)
There is no charge for corporation tax due to losses incurred in
    the year. The company is liable to corporation tax on profits
    from its operating activities at the reduced manufacturing rate
    of 10%. Manufacturing relief is due to expire on
    31 December 2010.
F-52
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 5 -
STAFF NUMBERS AND COSTS
The average number of persons employed by the company during the
    year, analysed by category, was as follows:
Number of
employees
2003
2002
No.
No.
Management
2
2
Administration
2
4
Selling
    and distribution
9
9
13
15
The aggregate payroll costs of these persons were as follows:
2003
2002
€
€
Salaries
492,204
661,024
Social
    welfare costs
38,582
42,930
Pension
    costs
36,621
34,006
567,407
737,960
F-53
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 6 -
TANGIBLE FIXED ASSETS
Land and
Plant and
Office
Computer
Motor
buildings
equipment
equipment
equipment
vehicles
Total
€
€
€
€
€
€
Cost
At
    beginning of year
5,116
238,431
6,290
64,556
253,198
567,591
Additions
    in year
-
7,602
305
6,467
-
14,374
At
    end of year
5,116
246,033
6,595
71,023
253,198
581,965
Depreciation
At
    beginning of year
980
83,272
4,209
39,706
66,778
194,945
Charge
    for year
205
36,905
901
14,030
63,299
115,340
At
    end of year
1,185
120,177
5,110
53,736
130,077
310,285
Net
    book value
At
    31 December 2003
3,931
125,856
1,485
17,287
123,121
271,680
At
    31 December 2002
4,136
155,159
2,081
24,850
186,420
372,646
Included in the net book value of tangible assets are motor
    vehicles held under finance leases amounting to
€
123,121
    (2002:
€
186,420).
    The depreciation charge in respect of these leased assets
    amounts to
€
63,299
    (2002:
€
67,634).
F-54
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 7 -
INTANGIBLE ASSETS
Trademarks
and patents
€
Cost
At
    beginning of year
81,471
Additions
    in year
7,434
At
    end of year
88,905
Depreciation
At
    beginning of year
46,909
Charge
    for year
17,781
At
    end of year
64,690
Net
    book value
At
    31 December 2003
24,215
At
    31 December 2002
34,562
Intangible assets represent patents and internally developed
    trademarks. The directors have elected to amortise intangible
    assets over a useful economic life of five years.
NOTE 8 -
DEFERRED DEVELOPMENT
EXPENDITURE
2003
2002
€
€
Balance
    at beginning of year
140,547
192,345
Development
    expenditure incurred during the year
55,694
25,740
Amortisation
(88,677
)
(77,538
)
Balance
    at end of year
107,564
140,547
Expenditure for Boru Vodka, Clontarf Whiskey and
    O'Leary's Cream brands, design, product development,
    market research, copyright, trademarks, patents, organization
    and tooling has been deferred and is amortised over a period of
    five years.
F-55
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 9 -
FINANCIAL ASSETS
2003
2002
€
€
Shares
    in
The
    Boru Vodka Company Limited
3
3
The
    Clontarf Irish Whiskey Company
3
3
Castle
    Brands Whiskey Company Limited
3
3
9
9
The Boru Vodka Company Limited, The Clontarf Irish Whiskey
    Company and Castle Brands Whiskey Company Limited all have their
    registered offices at 4 Herbert Place, Herbert Street, Dublin 2.
Activities
All three companies are 100% subsidiaries of Castle Brands
    Spirits Company Limited. At present all three are dormant.
NOTE 10 -
STOCKS
2003
2002
€
€
Raw
    materials
289,590
686,770
Finished
    Goods
592,467
200,488
882,057
887,258
There are no material differences between the replacement cost
    of stock and the balance sheet amounts.
NOTE 11 -
DEBTORS
2003
2002
€
€
Trade
    debtors
1,612,657
2,366,228
Prepayments
139,248
171,639
Other
    debtors
51,421
64,616
Amounts
    owed by related companies (note 25)
1,191,483
656,635
VAT
    receivable
171,329
183,725
3,166,138
3,442,843
F-56
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 12 -
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR
2003
2002
€
€
Trade
    creditors
1,429,819
1,196,665
Other
    creditors including tax and social welfare
47,139
50,384
Accruals
483,808
649,207
Amounts
    due under finance leases (note 14)
145,115
47,926
Amounts
    owned to related companies
–
41,302
Bank
    loan and overdraft (note 14)
552,244
290,141
Trade
    finance (note 14)
670,650
1,005,081
3,328,775
3,280,706
2003
2002
€
€
Taxation
    creditors
Taxation
    and social welfare included in other creditors:
PAYE/PRSI
34,950
74,633
Corporation
    tax
–
(24,249
)
Withholding
    tax
12,189
–
47,139
50,384
NOTE 13 -
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR
2003
2002
€
€
Amounts
    due under finance lease (note 14)
–
160,365
Shareholders'
    loans (note 14)
444,408
419,775
Bank
    loan (note 14)
188,578
314,948
632,986
895,088
F-57
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 14 -
DETAILS OF BORROWINGS
Maturity analysis
Within
Between one
Between two
one year
& two years
& five years
Total
€
€
€
€
Repayable by installments
Obligations under finance leases and hire purchase contracts
145,115
–
–
145,115
Repayable other than by installments
Bank loan and overdraft
552,244
68,368
120,210
740,822
Trade finance
670,650
–
–
670,650
Shareholders' loans
–
–
444,408
444,408
1,368,009
68,368
564,618
2,000,995
Security
The company has granted an All Monies Debenture dated
    4 February, 2000 giving a first floating charge over the
    assets of the company including all intellectual property rights
    to Ulster Bank Limited. A Letter of Waiver over the trade
    debtors dated 31 October, 2000 was issued to Ulster Bank
    Commercial Services Limited in respect of facilities maintained
    with them.
The company has granted an All Monies general counter indemnity
    dated 29 January, 2001 together with supporting resolution
    to Ulster Bank Limited.
David Phelan and Patrick Rigney have signed a joint and several
    letter of guarantee in the amount of
€
158,717 in
    favour of Ulster Bank Limited.
A deed of postponement dated 19 September, 1999 over the
    shareholders' loans in the amount of
€
253,948 has been
    signed in favour of Ulster Bank Limited.
Castle Brands Inc. has guaranteed the repayment of the
    shareholders' loans under the terms of the Agreement of
    Merger and Acquisitions.
F-58
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 15 -
DEFERRED INCOME
2003
2002
€
€
Capital
    grants
At
    the beginning of the year
10,192
12,873
Amortised
    during the year
(2,599
)
(2,681
)
At
    end of year
7,593
10,192
A liability may arise to repay, in whole or in part, revenue
    grants received to date amounting
    to
€
93,040,
    if certain events occur as detailed in the grant agreements. The
    terms of repayments are as follows:
Feasibility Grant:
• The company's liability for repayment of
    feasibility study grant paid in any year shall terminate five
    years from the end of that year and;
• The agreement shall terminate five years from the
    date of the last payment from the grants. The grant agreement
    start date was 23rd July 2000.
NOTE 16 -
PROVISIONS FOR LIABILITIES AND CHARGES
2003
2002
€
€
Deferred
    taxation
At
    the beginning of year
–
–
Charged
    to the profit and loss account
6,770
–
At
    end of year
6,770
–
Deferred
    taxation
The
    amounts provided for deferred taxation are set out below.
2003
2002
€
€
Difference
    between accumulated depreciation and amortisation and capital
    allowances
6,770
–
6,770
–
F-59
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 17 -
CALLED UP SHARE CAPITAL
2003
2002
€
€
Authorised
796,000
    (2001: 1,000,000) Ordinary shares of
€
1.25 each
995,000
995,000
20,000
    Class "A" Ordinary shares of
€
0.01 each
200
200
Reclassification
    of 204,000 Ordinary shares
2,550,000
    Class "B" Ordinary shares of
€
0.10 each
255,000
255,000
1,250,200
1,250,200
Issued,
    allotted and fully paid
At
    1 December 2003
412,947
    ordinary shares of
€
1.25 each
516,184
458,515
(2002:
    361,110 ordinary shares of
€
1.269738 each)
9,000
    "A" ordinary shares of
€
0.01 each
90
–
2,550,000
    "B" ordinary shares of
€
0.10 each
255,000
–
Issued
    during the year
Debenture
    converted
–
64,796
9,000
    "A" ordinary shares of
€
0.01 each
–
90
2,550,000
    "B" ordinary shares of
€
0.10 each
–
255,000
Renominalisation
    of share capital
–
(7,127
)
At
    31 December 2003
771,274
771,274
Rights of ordinary shares
The "A" ordinary shares and the "B" ordinary
    shares rank pari passu in all respects.
NOTE 18 -
RESERVES
Capital conversion
Share
Profit and
reserve
premium
loss account
Total
€
€
€
€
At
    beginning of year
7,127
555,877
(582,288
)
(19,284
)
Loss
    for the financial year
–
–
(46,887
)
(46,887
)
At
    end of year
7,127
555,877
(629,175
)
(66,171
)
F-60
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 19 -
RECONCILIATION OF MOVEMENT IN
SHAREHOLDERS' FUNDS
2003
2002
€
€
Shareholders'
    funds at beginning of year
751,990
425,742
(Loss)/profit
    for the financial year
(46,887
)
71,248
Debenture
    converted
–
(253,948
)
Ordinary
    shares issued
–
319,886
Renominalisation
    of share capital
–
(7,127
)
Capital
    conversion reserve
–
7,127
Increase
    in share premium
–
189,062
Shareholders'
    funds at end of year
705,103
751,990
NOTE 20 -
COMMITMENTS
Capital commitments
There were no capital commitments of a significant nature
    authorised at the balance sheet date.
Operating lease commitments
Annual commitments exist under non-cancellable operating leases
    as follows:
2003 Motor
2003
2002 Motor
2002
vehicles
Other
vehicles
Other
€
€
€
€
Expiring:
Between two and five years
–
5,577
7,359
6,747
NOTE 21 -
PENSIONS
The company operates a defined contribution pension scheme. The
    assets of the scheme are held separately from those of the
    company is an independently administered fund. The pension cost
    charge represents contributions payable by the company to the
    fund and amounted to
€
36,621 (2002:
€
34,006).
F-61
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 22 -
RECONCILIATION OF OPERATING
PROFIT TO NET CASH INFLOW FROM
OPERATING
ACTIVITIES
2003
2002
€
€
Operating
    profit
60,858
157,779
Depreciation
    of tangible fixed assets, amortization of intangible
assets,
    deferred development expenditure and government grants
219,199
208,028
Profit
    on disposal of leased assets
–
(13,257
)
Decrease/(increase)
    in stocks
5,201
(233,360
)
Decrease/(increase)
    in debtors
287,864
(782,154
)
(Decrease)/increase
    in creditors
(13,230
)
188,016
Net
    cash inflow/(outflow) from operating activities
559,892
(474,948
)
NOTE 23 -
ANALYSIS OF CASH FLOWS FOR
HEADINGS NETTED IN THE CASH FLOW STATEMENT
2003
2002
€
€
Returns
    on investment and servicing of finance
Interest
    paid
(85,179
)
(99,893
)
Interest
    element of finance lease repayments
(14,766
)
(11,467
)
Net
    cash (outflow) for returns on investment and servicing
    of
finance
(99,945
)
(111,360
)
Taxation
Tax
    repaid/(paid)
24,249
(62,907
)
Capital
    expenditure and financial investment
Purchase
    of fixed assets
(77,502
)
(178,905
)
Disposal
    of fixed assets
–
54,086
Net
    cash outflow for capital expenditure and financial investment
(77,502
)
(124,819
)
Financing
Capital
    element of finance lease repayments
(63,176
)
(50,991
)
Loans
    received during year
–
674,111
Loans
    repaid during the year
(36,811
)
–
Share
    capital issue
–
255,000
Total
    financing cash flows
(99,987
)
878,120
F-62
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 24 -
ANALYSIS OF NET DEBT
Bank and
Tradefinance
Cash at bank
shareholder
and bank
Finance
and in hand
loans
overdrafts
lease
Total
€
€
€
€
€
At 1 January 2003
60,111
(734,723
)
(1,295,222
)
(208,291
)
(2,178,125
)
Cash flows
169,453
36,811
137,254
63,176
406,694
At 31 December 2003
229,564
(697,912
)
(1,157,968
)
(145,115
)
(1,771,431
)
NOTE 25 -
RELATED PARTY TRANSACTIONS
The following entities are considered to be related parties for
    the purposes of Financial Reporting Standard No. 8 -
    "Related Party Disclosures":
Entity
Relationship
Castle
    Brands Inc (a Delaware Corporation)
Ultimate parent undertaking
Castle
    Brands Spirits Group
    Limited
(Irish
    registered undertaking)
Immediate parent undertaking
The
    Boru Vodka Company
    Limited
(Irish
    registered undertaking)
Subsidiary undertaking
The
    Clontarf Irish Whiskey
    Company
(Irish
    registered undertaking)
Subsidiary undertaking
Castle
    Brands Whiskey Company
    Limited
(Irish
    registered undertaking)
Subsidiary undertaking
Castle
    Brands Spirits Marketing and Sales Company
    Limited
(Irish
    registered undertaking)
Under common control
The
    Roaring Water Bay Spirits Company (GB)
    Limited
(UK registered
    undertaking)
Under common control
The
    Roaring Water Bay Spirits Company (NI)
    Limited
(NI registered
    undertaking)
Under common control
Great
    Spirits Company
    LLC
(a
    Delaware limited liability company)
Under common control
Details of transactions with related parties during the year are
    as follows:
Entity
Transaction
Payable (receivable)
€
The
    Roaring Water Bay Spirits Company
Sales
(365,790
)
(GB)
    Limited
Great
    Spirits Company LLC
Royalties
(288,934
)
Great
    Spirits Company LLC
Sales
(663,038
)
F-63
Table of Contents
CASTLE BRANDS SPIRITS COMPANY LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 25 -
RELATED PARTY TRANSACTIONS
(CONT'D)
Director
Directors loan
€
David Phelan
At 1 Jan 2003
24,633
Amounts repaid
24,633
At 31 Dec 2003
–
Disclosed to note 11 as amounts due from related
    undertakings at the balance sheet date are the following amounts:
2003
2002
€
€
Castle
    Brands Inc
861,544
–
Castle
    Brands Spirits Group Limited
2,613
2,613
The
    Roaring Water Bay Spirits Company (GB) Limited
–
654,022
Great
    Spirits Company LLC
327,326
–
1,191,483
656,635
The amounts due from The roaring Water Bay Spirits Company
    (GB) Limited to the company at 31 December 2003 of
€
836,912 was
    taken over by the Ultimate parent undertaking, Castle Brands,
    Inc.
NOTE 26 -
COMPARATIVES
Comparatives have been regrouped where necessary, on a basis
    consistent with the current year.
NOTE 27 -
APPROVAL OF FINANCIAL
STATEMENTS
The board of directors approved these financial statements on
    June 2, 2004.
F-64
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Directors' Report and Financial Statements
Year Ended 31 December 2003
Registered number     03699502
F-65
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Directors' Report and Financial Statements
Contents
Page
Directors' report
F-67
Statement of directors'
    responsibilities
F-69
Auditors' report
F-70
Statement of accounting policies
F-72
Profit and loss account
F-73
Balance sheet
F-74
Notes on and forming part of the financial
    statements
F-75
F-66
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Directors' Report
The directors present their annual report and audited financial
statements for the year ended 31 December 2003.
Principal activities, business review and future
developments
The principal activity of the company is the distribution of a
range of Irish spirit brands in the United Kingdom. These
include Boru Vodka, Clontarf Irish Whiskey and
O'Leary's Cream.
The Roaring Water Bay Spirits Company (GB) Limited is a
100% subsidiary of Castle Brands Spirits Marketing and
Sales Company Limited, a company registered in Ireland, having
its registered office at 4 Herbert Place, Herbert Street, Dublin
2.
Results and dividends
The profit and loss account and balance sheet for the year ended
31 December 2003 are set out on pages F-73 and F-74.
£
The loss for the financial year amounted to
(163,344
)
Profit and loss account at beginning of year
(545,627
)
Profit and loss account at end of year
(708,971
)
The directors do not recommend payment of a final dividend.
Post balance sheet events
There have been no significant events since the year end, which
would have an impact on the financial position at
31 December 2003.
Directors and their interests
The company's articles of association do not require the
directors to retire by rotation. The present directors of the
company are Patrick Rigney, David Phelan and John Joseph Walsh.
F-67
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Directors' Report
Interests of directors and secretary
The interests of the directors and secretary of the company who
are also directors of the ultimate parent company Castle Brands
Inc., in the shares of Castle Brands Inc., are stated in the
financial statements of that company.
Auditors
The auditors, BDO Simpson Xavier, Registered Auditors, have
indicated their willingness to continue in office and a
resolution to re-appoint them will be proposed at the annual
general meeting.
On behalf of the board:
/s/ Patrick Rigney
/s/ David Phelan
Patrick Rigney
David Phelan
Director
Director
Date June 3, 2004
F-68
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Statement of Directors' Responsibilities
United Kingdom company law requires the directors to prepare
financial statements for each financial year which give a true
and fair view of the state of affairs of the company and of the
profit or loss for that period. In preparing those financial
statements, the directors are required to:
•
select suitable accounting policies and then apply them
    consistently
•
make judgements and estimates that are reasonable and prudent
•
prepare the financial statements on the going concern basis
    unless it is inappropriate to presume that the company will
    continue in business
The directors are responsible for keeping proper books of
account which disclose with reasonable accuracy at any time the
financial position of the company and to enable them to ensure
that the financial statements comply with the Companies Acts
1985. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the
company and to prevent and detect fraud and other irregularities.
On behalf of the board:
/s/ Patrick Rigney
/s/ David Phelan
Patrick Rigney
David Phelan
Director
Director
Date June 3, 2004
F-69
Table of Contents
Independent Auditors' report to the Shareholders of
The Roaring Water Bay Spirits Company (GB) Limited
We have audited the financial statements on pages F-72 to
F-79 which comprise the Profit and Loss Account, the Balance
Sheet, and related notes. These financial statements have been
prepared under the historical cost convention and in accordance
with the accounting policies set out on pages F-72.
Respective responsibilities of directors and auditors
As described on page F-69, the company's directors are
responsible for the preparation of the financial statements. It
is our responsibility to form an independent opinion, based on
our audit, on those statements and to report our opinion to you.
Our responsibility is to audit the financial statements in
accordance with the relevant legal and regulatory requirements
and generally accepted auditing standards in the United Kingdom
and the United States of America.
We report to you our opinion as to whether the financial
statements are presented fairly, in all material respects, and
are properly prepared in accordance with Companies Act 1985. We
also report to you if, in our opinion, the Directors'
Report is not consistent with the financial statements, if the
company has not kept proper accounting records, if we have not
received all the information and explanations we require for our
audit, or if information specified by law regarding
directors' remuneration and transactions with the company
is not disclosed.
We read the other information contained in the annual report and
consider whether it is consistent with the audited financial
statements. We consider the implications for our report if we
become aware of any apparent misstatements or material
inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with generally accepted
auditing standards in the United Kingdom and the United States
of America. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the
significant estimates and, judgements made by the directors in
the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
F-70
Table of Contents
Independent Auditors' report to the Members of
The Roaring Water Bay Spirits Company (GB) Limited
Opinion
In our opinion, the financial statements referred to above
present fairly, in all material respects, the state of affairs
of the company at 31 December 2003 and 31 December
2002 and of the loss for the years then ended and have been
properly prepared in accordance with the Companies Acts, 1985
and all Regulations to be construed as one with those Acts.
We have obtained all the information and explanations we
considered necessary for the purposes of our audit. In our
opinion, proper books of account have been kept by the company.
The financial statements are in agreement with the books of
account.
In our opinion, the information given in the directors'
report on pages F-67 to F-68 is consistent with the
financial statements.
/s/ BDO Simpson Xavier
BDO Simpson Xavier
Date
3rd June 2004
Registered Auditors
Dublin, Ireland
F-71
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Statement of Accounting Policies
For the Year Ended 31 December 2003
The following accounting policies have been applied consistently
in dealing with items which are considered material, in relation
to the company's financial statements.
Basis of preparation
The financial statements have been prepared on a going concern
basis under the historical cost convention and comply with the
requirements of the Companies Acts 1985, and with financial
reporting standards of the Accounting Standards Board.
Turnover
Turnover, all which arises from continuing operations,
represents the value of goods and services at invoice value,
exclusive of excise duty, value added tax and trade discounts,
and inclusive of royalty income.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost, less accumulated
depreciation. The charge for depreciation is calculated to write
down the cost of tangible fixed assets to their estimated
residual values by equal annual installments over their expected
useful lives, which are as follows:
Motor vehicles
4 years
Stock and work in progress
Stocks are stated at the lower of cost and net realisable value.
Cost comprises purchase price, including freight and duty, and
in the case of work in progress and finished goods, all directly
related production overheads. Net realisable value comprises
estimated sales value less all further costs to completion and
further marketing, selling, and distribution costs.
Foreign currencies
The financial statements are expressed in Sterling (£).
Transactions in foreign currencies are recorded at the rate
ruling at the date of the transactions or at a contracted rate.
The resulting monetary assets and liabilities are translated at
the balance sheet rate or the contracted rate and the exchange
differences are dealt with in the profit and loss account.
Taxation
The charge for taxation is based on the profit or loss for the
year.
Deferred tax is provided on all timing differences that have
originated but not reversed, at the balance sheet date. Where
transactions or events that result in an obligation to pay more
tax in the future or a right to pay less tax in the future, have
occurred at the balance sheet date.
F-72
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
PROFIT AND LOSS ACCOUNT
For the Year Ended 31 December 2003
Note
2003
2002
£
£
Turnover
1
465,945
518,137
Cost of sales
(395,005
)
(461,172
)
Gross profit
70,940
56,965
Administration expenses
(62,782
)
(24,509
)
Selling and distribution
(166,844
)
(98,612
)
Operating loss
(158,686
)
(66,156
)
Interest payable and similar charges
2
(4,658
)
(2,739
)
Loss on ordinary activities before taxation
3-4
(163,344
)
(68,895
)
Tax on loss on ordinary activities
5
–
–
Loss for the financial year
(163,344
)
(68,895
)
Profit and loss account at beginning of year
(545,627
)
(476,732
)
Profit and loss account at end of year
(708,971
)
(545,627
)
The company had no recognised gains or losses for the year other
than the loss noted in the profit and loss account.
There is no material difference between the loss on ordinary
activities before taxation and the retained loss reported in the
profit and loss account and the equivalent figures calculated on
the historical cost basis.
The accompanying notes from an integral part of this profit and
loss account.
On behalf of the board:
/s/ Patrick Rigney
Patrick Rigney
Director
/s/ David Phelan
David Phelan
Director
Date June 3, 2004
F-73
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
BALANCE SHEET
At 31 December 2003
Note
2003
2002
£
£
£
£
Fixed assets
Tangible assets
6
15,805
21,680
Current assets
Bank
33,592
–
Stocks
7
72,192
43,715
Debtors
8
173,760
218,707
279,544
262,422
Creditors:
amounts falling due within one year
9
(635,725
)
(500,322
)
Net current Liabilities
(356,181
)
(237,900
)
Total assets less current liabilities
(340,376
)
(216,220
)
Creditors:
amounts falling due after one year
10
(368,593
)
(329,405
)
(708,969
)
(545,625
)
Financed by:
Capital and reserves
Called up share capital
11
2
2
Profit and loss account
12
(708,971
)
(545,627
)
Shareholders' deficit
13
(708,969
)
(545,625
)
The accompanying notes from an integral part of this balance
sheet.
On behalf of the board:
/s/ Patrick Rigney
Patrick Rigney
Director
/s/ David Phelan
David Phelan
Director
Date June 3, 2004
F-74
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 1 -
TURNOVER
Turnover is derived entirely from the sale of alcoholic spirits
    in Great Britain.
NOTE 2 -
INTEREST PAYABLE AND SIMILAR CHARGES
2003
2002
£
£
Interest
    and bank charges
4,658
2,739
NOTE 3 -
STATUTORY AND OTHER INFORMATION
2003
2002
£
£
Auditors'
    remuneration, including expenses
4,000
4,000
NOTE 4 -
STAFF NUMBERS AND COSTS
The average number of persons employed by the company during the
    year, analysed by category, was as follows:
No.
No.
2003
2002
Selling
    and distribution
1
1
1
1
The aggregate payroll costs of these persons were as follows:
2003
2002
£
£
Salaries
56,280
38,842
NOTE 5 -
TAX ON LOSS ON ORDINARY ACTIVITIES
There is no provision for Corporation Tax due to trading losses
    incurred.
NOTE 6 -
TANGIBLE FIXED ASSETS
Motor
Vehicles
Total
£
£
Cost
At
    beginning of year
23,500
23,500
Additions
    in year
–
–
At
    end of year
23,500
23,500
F-75
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 6 -
TANGIBLE FIXED ASSETS
(CONT'D)
Motor
Vehicles
Total
£
£
Depreciation
At
    beginning of year
1,820
1,820
Charge
    for year
5,875
5,875
At
    end of year
7,695
7,695
Net
    book value
At
    31 December 2003
15,805
15,805
At
    31 December 2002
21,680
21,680
Included in the net book value of tangible fixed assets are
    motor vehicles held under finance leases amounting to
    £15,805. The depreciation charge in respect of these leased
    assets amounts to £5,875. This depreciation charge is
    charged to the profit and loss account of Castle Brands Spirits
    Company Limited as the vehicle is solely used by one of their
    employees, however the vehicle was financed leased by The
    Roaring Water Bay Spirits Company (GB) Limited.
NOTE 7 -
STOCKS
2003
2002
£
£
Finished
    goods
72,192
43,715
There are no material differences between the replacement cost
    of stock and the balance sheet amounts.
NOTE 8 -
DEBTORS
2003
2002
£
£
Trade
    debtors
171,677
214,124
Prepayments
2,083
4,583
173,760
218,707
F-76
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 9 -
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR
2003
2002
£
£
Trade
    creditors
30,353
2,016
PAYE/PRSI
10,521
7,605
Accruals
–
10,446
VAT
3,778
11,671
Amounts
    owed to related undertaking
516,038
425,312
Bank
    loans and overdraft
14,777
39,377
Memorandum
    discounting facility
57,072
–
Amounts
    due under finance lease obligations
3,186
3,895
635,725
500,322
NOTE 10 -
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR
2003
2002
£
£
Amount
    owed to related undertaking
357,965
309,800
Amounts
    due under finance lease obligations
10,628
19,605
368,593
329,405
NOTE 11 -
CALLED UP SHARE CAPITAL
2003
2002
£
£
Authorised
100
    Ordinary shares of £1 each
100
100
Alloted,
    called up and fully paid
2
    Ordinary shares of £1 each
2
2
NOTE 12 -
RESERVES
Profit and
Loss Account
£
At
    1 January 2003
(545,627
)
Loss
    for the financial year
(163,344
)
At
    31 December 2003
(708,971
)
F-77
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 13 -
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS'
    DEFICIT
2003
2002
£
£
Shareholders'
    deficit at beginning of year
(545,625
)
(476,730
)
Loss
    for the financial year
(163,344
)
(68,895
)
Shareholders' deficit at end of year
(708,969
)
(545,625
)
NOTE 14 -
COMMITMENTS
Capital Commitments
There were no capital commitments of a significant nature
    authorized at the balance sheet date.
NOTE 15 -
SECURITY
David Phelan and Patrick Rigney have granted a joint and several
    letter of guarantee in the amount of £40,000 each, in
    favour of Ulster Bank Limited.
Ulster Bank Limited also holds an all monies General Counter
    Indemnity dated 29 January 2001 together with supporting
    resolution in respect of the C & D Guarantee in
    the amount of £40,000.
NOTE 16 -
RELATED PARTY TRANSACTIONS
The following entities are considered to be related parties for
    the purposes of Financial Reporting Standard No. 8 -
    "Related Party Disclosures":
Entity
Relationship
Castle Brands Inc. (a Delaware Corporation)
Ultimate parent undertaking
Castle Brands Spirits Marketing and Sales Company Limited (Irish
    registered undertaking)
Immediate parent undertaking
The Roaring Water Bay Spirits Company (NI) Limited (NI
    registered undertaking)
Under common control
Castle Brands Spirits Group Limited (Irish registered
    undertaking)
Under common control
Castle Brands Spirits Company Limited (Irish
    registeredundertaking)
Under common control
The Boru Vodka Company Limited (Irish registered undertaking)
Under common control
The Clontarf Irish Whiskey Company (Irish registered undertaking)
Under common control
Castle Brands Whiskey Company Limited (Irish registered
    undertaking)
Under common control
Great Spirits Company LLC (a Delaware limited liability company)
Under common control
F-78
Table of Contents
THE ROARING WATER BAY SPIRITS COMPANY (GB) LIMITED
Notes on and forming part of the Financial Statements
For the Year Ended 31 December 2003
NOTE 16 -
RELATED PARTY TRANSACTIONS (CONT'D)
Details of transactions with related parties during the year are
    follows:
Entity
Transaction
Payable/(receivable)
£
Castle
    Brands Spirits Company Limited
Purchases
255,391
Disclosed in note 9 as amounts due within one year to
    related undertakings at the balance sheet date are the following
    amounts:
2003
2002
£
£
Castle
    Brands Inc.,
516,038
-
Castle
    Brands Spirits Company Limited
-
425,312
516,038
425,312
Disclosed in note 10 as amounts due after one year to
    related undertakings at the balance sheet date are the following
    amounts:
2003
2002
£
£
Castle
    Brands Spirits Marketing and Sales Company Limited
357,965
309,800
NOTE 17 -
CASH FLOW STATEMENT
The company has relied on specified exemptions contained in
    Financial Reporting Standard No. l on the grounds that the
    company is entitled to the benefit of those exemptions as a
    small company.
NOTE 18 -
COMPARATIVES
Comparatives have been regrouped where necessary, on a basis
    consistent with the current year.
NOTE 19 -
APPROVAL OF FINANCIAL
STATEMENTS
The financial statements were approved by the board on
    June 3 2004.
F-79
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Castle Brands Inc.
We have examined Castle Brands Spirits Company Limited's
(formerly known as The Roaring Water Bay Spirits Company
Limited) schedule reconciling their financial statements
prepared in accordance with the Companies Acts, 1963 to 2003 and
all regulations to U.S. generally accepted accounting principles
of as and for the years ended December 31, 2003 and 2002
and The Roaring Water Bay Spirits Company (GB) Limited's
schedule reconciling their financial statements prepared in
accordance with the Companies Acts, 1985 and all regulations to
U.S. generally accepted accounting principles of as and for the
years ended December 31, 2003. Each Company's
management is responsible for their schedules of reconciliation.
Our responsibility is to express an opinion based on our
examinations.
Our examinations were conducted in accordance with the standards
of the Public Company Accounting Oversight Board (United States)
and, accordingly, included examining on a test basis, evidence
supporting the Companies' reconciliations and performing
such other procedures as we considered necessary in the
circumstances. We believe that our examinations provide a
reasonable basis for our opinion.
Our examination disclosed that The Roaring Water Bay Spirits
Company (GB) Limited's financial statements omitted a
statement of cash flows which is required to be presented.
In our opinion, except for the omission of a statement of cash
flows described in the preceding paragraph, the schedules
referred to above present, in all material respects, the
reconciling differences between net income (loss) and
shareholders' equity amounts reported in the historical
financial statements and the corresponding amounts that would be
reported if those financial statements were presented directly
in U.S. generally accepted accounting principles.
/s/ Eisner LLP
Eisner LLP
New York, NY
September 21, 2005
F-80
Table of Contents
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The financial statements of the Castle Brands Spirits Company
Limited (formerly known as the Roaring Water Bay Spirits Company
Ltd.) are prepared in accordance with generally accepted
accounting principles in Ireland ("Irish GAAP")
conform to those generally accepted in the United States
("U.S. GAAP"), in all material respects, except as
noted below:
Reconciliation of Income/(Losses) reported to U.S.
GAAP:
Year
Year
ended
ended
December 31,
December 31,
2003
2003
Net (loss)/income as reported in accordance with Irish GAAP
$
(54,056
)
67,393
Adjustments:
Deferred expenditures — R&D
(64,210
)
( 24,347
)
Amortization — deferred expenditures
102,236
73,343
Net (loss)/income under U.S. GAAP
$
(16,030
)
$
116,389
Basic and diluted net loss per share under U.S. GAAP:
$
(.02
)
$
.19
Deferred expenditures — R&D
—
Under Irish GAAP, research and development costs are
capitalized and amortized over five years. Under U.S. GAAP,
research and development costs are expensed as incurred.
Push down accounting —
The statutory financial
statements of the Castle Brands Spirits Company Limited
(formerly known as the Roaring Water Bay Spirits Company Ltd.)
are stated at historical cost. The adjustments to U.S. GAAP
include the "push down" of the fair value of all
assets acquired in the acquisition by Castle Brands, Inc., as of
December 1, 2003, of $17,421,051.
Reconciliation of total assets, liabilities, and
shareholder equity to U.S. GAAP:
December 31,
December 31,
2003
2002
Total assets under Irish GAAP
$
5,878,217
$
5,176,480
Adjustments to U.S. GAAP
17,285,983
(147,335
)
Total assets under U.S. GAAP
$
23,164,200
$
5,029,145
Total liabilities under Irish GAAP
$
4,992,819
$
4,388,169
Adjustments to U.S. GAAP
(   —
)
(   —
)
Total liabilities under U.S. GAAP
$
4,992,819
$
4,388,169
Total stockholders equity under Irish GAAP
$
885,398
$
788,311
Adjustments to U.S. GAAP
17,285,983
(147,335
)
Total stockholders equity under U.S. GAAP
$
18,171,381
$
640,976
Total liabilities and stockholders equity under U.S. GAAP
$
23,164,200
$
5,029,145
F-81
Table of Contents
Reconciliation of statements of cash flow to U.S.
GAAP:
Year
Year
ended
ended
December 31,
December 31,
2003
2003
Cash flows from operating activities under Irish GAAP
Net loss/income as reported in accordance with U.K. GAAP
$
( 54,056
)
$
67,393
Adjustments:
Deferred expenditures — R&D
( 64,210
)
( 24,347
)
Amortization — deferred expenditures
102,236
73,343
Net (loss)/income under U.S. GAAP
$
(16,030
)
$
116,389
Adjustments to reconcile net (loss)/income to net cash used in
    operating activities
Depreciation and amortization
(102,236
)
(73,343
)
Net cash provided by (used in) operating activities under
    U.S. GAAP
( 102,236
)
( 73,343
)
Cash flows from investing activities under Irish GAAP
    Deferred expenditures — R&D
64,210
24,347
Net cash used in operating activities under U.S. GAAP
64,210
24,347
The functional currency used on these financial statements is
not a highly inflationary currency.
The exchange rates used at December, 31st 2003 and
December, 31st 2002, were 1.2557 and 1.0483, respectively. The
weighted average exchange rates at December, 31st 2003 and
December, 31st 2002 were 1.1529 and 0.9459, respectively.
F-82
Table of Contents
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The financial statements of the Roaring Water Bay Spirits
Company (GB) Ltd. are prepared in accordance with generally
accepted accounting principles in the United Kingdom
("UK GAAP") and conform to those generally
accepted in the United States ("U.S. GAAP"), in
all material respects.
F-83
Table of Contents
2,500,000 Shares
Common Stock
PROSPECTUS
Oppenheimer &
Co.
ThinkEquity Partners
    LLC
Ladenburg Thalmann &
    Co. Inc.
Through and
including                       ,
2005 (25 days after the date of this prospectus), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotment or subscriptions.
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution
The following table sets forth the expenses payable in
connection with the offering described in the Registration
Statement. All such expenses are estimates except for the SEC
registration fee, the NASD filing fee and the American Stock
Exchange filing fee. These expenses will be borne by the
Registrant.
SEC registration fee
$
3,722.26
NASD filing fee
3,662.50
AMEX filing fee
55,000.00
Transfer agent and registrar fees
*
Accountants' fees and expenses
*
Legal fees and expenses
*
Printing and engraving expenses
*
Miscellaneous fees and expenses
*
Total
$
*
*
To be filed by amendment
Item 14.
Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law, or
DGCL, permits, in general, a Delaware corporation to indemnify
any person who was or is a party to any proceeding (other than
an action by, or in the right of, the corporation) by reason of
the fact that he or she is or was a director or officer of the
corporation, or served another entity in any capacity at the
request of the corporation, against liability incurred in
connection with such proceeding, including the estimated
expenses of litigating the proceeding to conclusion and the
expenses actually and reasonably incurred in connection with the
defense or settlement of such proceeding, including any appeal
thereof, if such person acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best
interests of the corporation and, in criminal actions or
proceedings, additionally had no reasonable cause to believe
that his or her conduct was unlawful. Section 145(e) of the
DGCL permits the corporation to pay such costs or expenses in
advance of a final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of the director or
officer to repay such amount if he or she is ultimately found
not to be entitled to indemnification under the DGCL.
Section 145(f) of the DGCL provides that the
indemnification and advancement of expense provisions contained
in the DGCL shall not be deemed exclusive of any rights to which
a director or officer seeking indemnification or advancement of
expenses may be entitled.
Our certificate of incorporation and bylaws provide, in general,
that we shall indemnify, to the fullest extent permitted by law,
any and all persons whom we shall have the power to indemnify
under those provisions from and against any and all of the
expenses, liabilities, or other matters referred to in or
covered by those provisions. Our certificate of incorporation
and bylaws also provide that the indemnification provided for
therein shall not be deemed exclusive of any other rights to
which those indemnified may be entitled as a matter of law or
which they may be lawfully granted.
In connection with this offering, we are entering into
indemnification agreements with each of our current directors
and officers to give these directors and officers additional
contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation
and bylaws and to provide additional procedural protections. We
expect to enter into a similar agreement with any new directors
or executive officers. We expect to increase our directors'
and officers' liability insurance to $10.0 million of
coverage.
II-1
Table of Contents
The Underwriting Agreement to be filed as Exhibit 1 to this
registration statement will provide for indemnification by us
and the underwriters for certain civil liabilities.
Item 15.
Recent Sales of Unregistered Securities
During the three years preceding the filing of this registration
statement, we sold the following securities which were not
registered under the Securities Act of 1933, as amended:
From December 3, 1999 through September 11, 2002,
Great Spirits Company LLC, the predecessor of our company,
issued 400,000 shares representing limited liability
company membership interests at various prices up to
$30.00 per share to 40 accredited investors, as defined in
Rule 501 promulgated under the Securities Act of 1933, for
an aggregate offering price of $11.2 million. These
membership interests were issued in reliance upon
Section 4(2) of the Securities Act of 1933 as a transaction
by an issuer not involving a public offering. 40,000 of these
shares representing membership interests were converted to
40,000 of our Series B convertible preferred shares on
February 20, 2003 in reliance on Section 4(2) of the
Securities Act of 1933. No commissions or underwriting expenses
were paid in connection with this transaction.
From February 20, 2003 through July 31, 2003, Great
Spirits Company LLC sold 107,143 shares of Series A
convertible preferred shares at a purchase price of
$7.00 per share for an aggregate of $3.8 million to a
total of 36 accredited investors. We issued these Series A
convertible preferred shares in reliance upon Section 4(2)
of the Securities Act of 1933 as a transaction by an issuer not
involving a public offering. No commissions or underwriting
expenses were paid in connection with this transaction.
On August 23, 2003, Great Spirits Company LLC entered into
a Revolving Loan Agreement with Keltic Financial Partners, LP,
an institutional investor, providing for a $1.5 million
financing secured by receivables, inventory and related items.
In connection with the financing, Great Spirits Company LLC
issued a warrant to the lender, an accredited investor, to
purchase up to 100,000 shares of limited liability company
membership interest at $6.00 a share. The note and warrant were
issued in reliance upon Section 4(2) of the Securities Act
of 1933 as a transaction by an issuer not involving a public
offering. No commissions or underwriting expenses were paid in
connection with this transaction.
On December 1, 2003, Great Spirits Company LLC issued
2,068,750 Series C convertible preferred shares at
$8.00 per share to 65 accredited investors or
non-U.S. residents for an aggregate purchase price of
$16.6 million in connection with the acquisition of Roaring
Water Bay Spirits Group companies and the merger of Great
Spirits Company LLC with our company. In connection with such
merger and acquisition our company issued five shares of common
stock or Series A or B convertible preferred stock, as
applicable, to members of Great Spirits Company LLC for each
like share of membership interest. On February 9, 2004,
Watch Hill Advisors LLC, a registered broker-dealer, received a
placement fee of $1.1 million and a warrant to
purchase 107,118 shares of our common stock at $8.00 a
share as placement agent for such transaction. We issued these
shares and the Series C convertible preferred stock in
reliance upon Section 4(2) of the Securities Act of 1933 as
a transaction by an issuer not involving a public offering.
In connection with the acquisition of the Roaring Water Bay
Spirits Group companies, on December 1, 2003, we sold an
aggregate principal amount of
€
1,374,750 of our
5% euro denominated convertible subordinated notes due
December 1, 2006. On the same day, our wholly owned
subsidiary Castle Brands Spirits Group Limited sold an aggregate
principal amount
of
€
444,389
of its subordinated notes due December 1, 2006, to four
non-U.S. residents and former owners of the Roaring Water
Bay Spirits Group companies. In connection with that closing we
also sold a 5% subordinated note due July 11, 2007, in
the principal amount
of
€
255,000
to FBD International Financial Services, a
non-U.S. resident in connection with the acquisition of
minority interest shares in Castle Brands Spirits Group Limited.
These notes were issued in reliance upon Section 4(2) of
the Securities Act of 1933 as a transaction by an issuer not
involving a public offering. No commissions or underwriting
expenses were paid in connection with this transaction.
II-2
Table of Contents
On June 9, 2004, our wholly owned subsidiary Castle Brands
(USA) Corp. issued an aggregate principal amount of
$4.6 million of its 8% senior secured notes which are
guaranteed as to payment by our company. These notes were
accompanied by warrants to purchase 25 shares of our
common stock at $8.00 a share for every $1,000 principal amount
of such notes for an aggregate of 116,500 shares, to 27
accredited investors or non-U.S. residents. The notes and
warrants were issued in reliance upon Section 4(2) of the
Securities Act of 1933 as a transaction by an issuer not
involving a public offering. No commissions or underwriting
expenses were paid in connection with this transaction.
From March through August, 2005, we issued $15.0 million
aggregate principal amount of our 6% convertible
subordinated promissory notes to two institutional investors,
each an accredited investor. The notes are convertible into one
share of our common stock for each $7.00 in principal with
respect to 40% of the principal amount and $8.00 for the
remainder. We issued the notes in reliance upon
Section 4(2) of the Securities Act of 1933 as a transaction
by an issuer not involving a public offering. No commissions or
underwriting expenses were paid in connection with this
transaction.
From November 30, 2004 through August 2, 2005, we sold
an aggregate of 1,300,000 shares of our Series C
convertible preferred stock to 116 accredited investors or
non-U.S. residents at $8.00 a share for an aggregate
purchase price of $10.4 million. Ladenburg
Thalmann & Co. Inc., a registered broker-dealer, acted
as the placement agent and Potomac Capital Markets, LLC, a
registered broker-dealer, acted as sub-placement agent, and
together they received aggregate placement fees of $421,330 and
we issued warrants to them and/or their designees to purchase an
aggregate of 65,000 shares of our common stock at
$8.00 per share. We issued these shares to the investors
and the placement agent warrants to Ladenburg
Thalmann & Co. and its designees and Potomac Capital
Markets in reliance upon Section 4(2) of the Securities Act
of 1933 as a transaction by an issuer not involving a public
offering and Section 901 of the Securities Act of 1933 as
an offshore transaction to a non-U.S. person.
On January 1, 2005, we issued a warrant to
purchase 20,000 shares of our common stock at
$8.00 per share to Charles Shuler, and on August 23,
2005 we issued a warrant to purchase 100,000 shares of our
common stock at $8.00 per share to Fieldstone Partners
Inc., each an accredited investor, in return for consulting
services. These warrants were issued in reliance upon
Section 4(2) of the Securities Act of 1933 as a transaction
by an issuer not involving a public offering. No commissions or
underwriting expenses were paid in connection with this
transaction.
In connection with our purchase of a 60% interest in our
strategic export venture with Gosling's and that
venture's procurement of an exclusive global (except
Bermuda) export agreement with Gosling's Export (Bermuda)
Limited, we issued warrants to certain members and/or employees
of the Gosling family as of April 1, 2005 for the purchase
of 90,000 shares of our common stock at $8.00 per
share. We issued this warrant in reliance upon Section 4(2)
of the Securities Act of 1933, as a transaction by an issuer not
involving a public offering. No commissions or underwriting
expenses were paid in connection with the transaction.
Between August 8, 2003 and September 27, 2005, we granted
options to purchase shares of our common stock to our employees
and directors under our stock incentive plan at exercise prices
ranging from $6.00 to $8.00. Of the options granted under the
stock incentive plan as of September 27, 2005, options to
purchase an aggregate of 878,500 shares of common stock
remain outstanding and options to purchase 104,000 shares
have been cancelled and returned to the option plan. None of
these options have been exercised. We issued these options in
reliance on Rule 701 promulgated under the Securities Act
of 1933 in that the securities were offered and sold either
pursuant to a written compensatory benefit plan or pursuant to a
written contract relating to compensation.
In addition, each of the share or warrant certificates and each
of the notes issued in the transactions listed above bears a
restrictive legend permitting the transfer thereof only in
compliance with applicable securities laws. The recipients of
securities in each of these transactions listed above
represented to us their intention to acquire the securities for
investment only and not with view to or for sale in connection
with any distribution thereof. All recipients had adequate
access, through their relationship with us or through other
access to information provided by us, to information about our
company.
II-3
Table of Contents
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.
II-4
Table of Contents
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 4, 2005, by and between Castle Brands Inc. and Mark
    Andrews
10
.19*
Amended and Restated Employment Agreement, effective as of
    July 19, 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
.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
II-5
Table of Contents
Exhibit Number
Exhibit
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
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
II-6
Table of Contents
Exhibit Number
Exhibit
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
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
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
.2
Consent of BDO Simpson Xavier, Independent Registered Public
    Accounting Firm (The Castle Brands Spirits Company Limited
    (formerly known as The Roaring Water Bay Spirits Company
    Limited))
23
.3
Consent of BDO Simpson Xavier, Independent Registered Public
    Accounting Firm (The Roaring Water Bay Spirits Company (GB)
    Limited)
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.
**
Confidential treatment requested for certain portions of this
    exhibit pursuant to Rule 406 under the Securities Exchange
    Act of 1934, as amended, which portions are omitted and filed
    separately with the Securities and Exchange Commission.
II-7
Table of Contents
(b)           Financial
Statement Schedules
Valuation and Qualifying Accounts (in thousands)
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:
6/30/05 Allowance for doubtful accounts
$
81
12
—
$
93
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:
6/30/05 Allowance for excess and obsolescence
$
164
—
—
$
164
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:
6/30/05 Valuation reserve
$
5,180
815
—
$
5,918
2005 Valuation reserve
1,471
3,709
—
5,180
2004 Valuation reserve
—
1,471
—
1,471
2003 Valuation reserve
—
—
—
—
II-8
Table of Contents
Item 17.
Undertakings
The undersigned registrant hereby undertakes to provide to the
underwriter, at the closing specified in the underwriting
agreement, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers,
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)           For
purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2)           For
the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-9
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the
29th day of September, 2005.
CASTLE BRANDS INC.
By:
/s/ Mark Andrews
Mark Andrews
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Mark Andrews,
Keith A. Bellinger and Matthew F. MacFarlane, and each or any of
them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign
this Registration Statement, and any and all amendments
(including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and
all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact
and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
Signature
Title
Date
/s/
Mark Andrews
Mark
    Andrews
Chairman of the Board, President and Chief Executive Officer
    (Principal Executive Officer)
September 29, 2005
/s/
Keith A. Bellinger
Keith
    A. Bellinger
Executive Vice President, Chief Operating Officer and Secretary
    (Principal Financial Officer)
September 29, 2005
/s/
Matthew F.
    MacFarlane
Matthew
    F. MacFarlane
Senior Vice President and Chief Financial Officer (Principal
    Accounting Officer)
September 29, 2005
/s/
John F. Beaudette
John
    F. Beaudette
Director
September 29, 2005
/s/
Robert J. Flanagan
Robert
    J. Flanagan
Director
September 29, 2005
S-1
Table of Contents
Signature
Title
Date
/s/
Colm Leen
Colm
    Leen
Director
September 29, 2005
/s/
Phillip
    Frost, M.D.
Phillip
    Frost, M.D.
Director
September 29, 2005
/s/
Richard Morrison
Richard
    Morrison
Director
September 29, 2005
/s/
Frederick M.R.
    Smith
Frederick
    M.R. Smith
Director
September 29, 2005
/s/
Kevin P. Tighe
Kevin
    P. Tighe
Director
September 29, 2005
S-2
Table of Contents
INDEX
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.
Table of Contents
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 4, 2005, by and between Castle Brands Inc. and Mark
    Andrews
10
.19*
Amended and Restated Employment Agreement, effective as of
    July 19, 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
.24
Letter Agreement, dated February 15, 2005, between Castle
    Brands Inc. and Patrick Rigney
Table of Contents
Exhibit Number
Exhibit
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
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
Table of Contents
Exhibit Number
Exhibit
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
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
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
.2
Consent of BDO Simpson Xavier, Independent Registered Public
    Accounting Firm (The Castle Brands Spirits Company Limited
    (formerly known as The Roaring Water Bay Spirits Company
    Limited))
23
.3
Consent of BDO Simpson Xavier, Independent Registered Public
    Accounting Firm (The Roaring Water Bay Spirits Company (GB)
    Limited)
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.
**
Confidential treatment requested for certain portions of this
    exhibit pursuant to Rule 406 under the Securities Exchange
    Act of 1934, as amended, which portions are omitted and filed
    separately with the Securities and Exchange Commission.