UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of Earliest Event Reported):
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November 17, 2014
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Castle Brands Inc.
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(Exact name of registrant as specified in its charter)
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Florida
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001-32849
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41-2103550
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_____________________
(State or other jurisdiction
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_____________
(Commission
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______________
(I.R.S. Employer
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of incorporation)
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File Number)
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Identification No.)
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122 East 42nd Street, Suite 4700, New York, New York
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10168
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_________________________________
(Address of principal executive offices)
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___________
(Zip Code)
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Registrants telephone number, including area code:
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(646) 356-0200
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Not Applicable
______________________________________________
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On November 17, 2014, Castle Brands Inc. issued a press release announcing financial results for the three and six months ended September 30, 2014. A copy of the press release is attached hereto as Exhibit 99.1.
The information included herein and in Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 ("Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press release dated November 17, 2014.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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Castle Brands Inc.
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November 17, 2014
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By:
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/s/ Alfred J. Small
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Name: Alfred J. Small
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Title: SVP, CFO, Treas. & Secretary
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Exhibit Index
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Exhibit No.
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Description
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99.1
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Press release dated November 17, 2014.
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Castle Brands Announces Fiscal 2015 Second Quarter Results
Net Sales Increase 14.8% Driven by Continued Strong Growth of Whiskeys and
Goslings Stormy Ginger Beer
NEW YORK November 17, 2014 Castle Brands Inc. (NYSE MKT: ROX), a developer and international
marketer of premium and super-premium branded spirits, today reported financial results for the
three and six month periods ended September 30, 2014.
Operating highlights for the quarter ended September 30, 2014:
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Net sales increased 14.8% to $13.4 million as compared to $11.7 million for
the comparable prior-year period. |
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Continued strong growth of Jeffersons bourbons and Irish whiskey led to a
36.8% increase in whiskey revenues from the comparable prior-year period. |
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Goslings Stormy Ginger Beer case sales increased 72% to approximately 192,000
cases from approximately 112,000 from the comparable prior-year period. |
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Net loss improved to ($0.9) million as compared to ($4.1) million in the
comparable prior-year period. |
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EBITDA, as adjusted, improved by 11.1% to $141,000 compared to a $127,000 in
the comparable prior-year period. |
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The Companys revolving credit facility capacity was increased from $8 million
to $12 million, the maturity date was extended and the interest rate was reduced. |
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Additional aged bourbon was purchased to support increased growth of
Jeffersons |
In addition to strong continued organic growth, we improved our margins, decreased G&A as a
percent of revenue, significantly reduced net loss and showed positive EBITDA, as adjusted. We
expect these trends of substantial growth and improving financial performance to continue over the
balance of the fiscal year. We also improved our capital structure by repaying all $1,250,000 of
our Junior Notes (11% interest) with cash generated by the exercise of warrants and increased
availability under our revolving credit facility (6.25% interest), stated Richard J. Lampen,
President and Chief Executive Officer of Castle Brands.
In the second quarter, we used recently purchased aged bourbon reserves to support increased sales
of Jeffersons and Jeffersons Reserve, expand our Jeffersons barrel program, accelerate our
Jeffersons Ocean Aged at Sea program and position us to re-issue Jeffersons Chefs Collaboration.
Just as we are expanding our offerings under the Jeffersons umbrella, we are also expanding our
Irish whiskey offerings. We have initiated a Knappogue barrel program and plan to add additional
offerings under our Knappogue and Clontarf labels. These initiatives, both with Jefferson and our
Irish whiskeys, should provide additional growth for our whiskey sales, said John Glover, Chief
Operating Officer of Castle Brands.
Sales of Goslings Stormy Ginger Beer increased 72% to 192,000 cases in the second quarter of
fiscal 2015, an indication of the success of the Dark n Stormy® cocktail, an important driver of
Goslings sales. Trailing twelve month sales of Stormy Ginger Beer were approximately 570,000
cases, which equates to over 13 million cans each prominently displaying the Goslings logo. These
ginger beer sales help build Goslings visibility and prominence as a brand, Mr. Glover added.
In the second quarter of fiscal 2015, the Company had net sales of $13.4 million, a 14.8% increase
from net sales of $11.7 million in the comparable prior-year period. Net loss was ($0.9) million in
the second quarter of fiscal 2015 compared to a net loss of ($4.1) million in the comparable
prior-year period. Net loss attributable to common shareholders was ($1.1) million, or ($0.01) per
basic and diluted share, in the second quarter of fiscal 2015, as compared to ($4.6) million, or
($0.04) per basic and diluted share, in the prior-year period.
EBITDA, as adjusted, for the second quarter of fiscal 2015 improved to $141,000 as compared to
$127,000 for the comparable prior-year period.
For the six months ended September 30, 2014, the Company had net sales of $25.4 million, a 14.9%
increase from net sales of $22.1 million in the comparable prior-year period. Net loss was ($2.1)
million for the six months ended September 30, 2014, as compared to a net loss of ($5.2) million in
the comparable prior-year period. Net loss attributable to common shareholders was ($2.6) million,
or ($0.02) per basic and diluted share, for the six months ended September 30, 2014, as compared to
($6.1) million, or ($0.06) per basic and diluted share, in the prior-year period.
EBITDA, as adjusted, for the first six months of fiscal 2015 improved to $89,000 as compared to a
loss of ($32,000) for the comparable prior-year period.
Non-GAAP Financial Measures
Within the information above, Castle Brands provides information regarding EBITDA, as adjusted,
which is not a recognized term under GAAP (Generally Accepted Accounting Principles) and does not
purport to be an alternative to operating income (loss) or net income (loss) as a measure of
operating performance. Earnings before interest, taxes, depreciation and amortization, or EBITDA,
adjusted for allowance for doubtful accounts, other (income) expense, net, stock-based compensation
expense, loss from equity investment in non-consolidated affiliate, foreign exchange loss, net
change in fair value of warrant liability, net income attributable to non-controlling interests and
dividend to preferred shareholders is a key metric the Company uses in evaluating its financial
performance on a consistent basis across various periods. EBITDA is considered a non-GAAP financial
measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as
amended. Due to the significance of non-cash and non-recurring items, EBITDA, as adjusted, enables
the Companys Board of Directors and management to monitor and evaluate the business on a
consistent basis. The Company uses EBITDA, as adjusted, as a primary measure, among others, to
analyze and evaluate financial and strategic planning decisions regarding future allocation of
capital resources. The Company believes that EBITDA, as adjusted, eliminates items that are not
indicative of its core operating performance or are based on managements estimates, such as
allowances for doubtful accounts and obsolete inventory, are due to changes in valuation, such as
the effects of changes in foreign exchange or fair value of warrant liability, or do not involve a
cash outlay, such as stock-based compensation expense. EBITDA, as adjusted, should be considered in
addition to, rather than as a substitute for, income from operations, net income and cash flows
from operating activities. Reconciliation of net loss to EBITDA, as adjusted, is presented below.
About Castle Brands
Castle Brands is a developer and international marketer of premium beverage alcohol brands
including: Goslings Rum®, Jeffersons®, Jeffersons Presidential
SelectTM and Jeffersons Reserve® Bourbon, Jeffersons® Rye
Whiskey, Knappogue Castle Whiskey®, Clontarf® Irish Whiskey,
Pallini® Limoncello, Boru® Vodka and Bradys® Irish Cream.
Additional information concerning the Company is available on the Companys website,
www.castlebrandsinc.com.
Forward Looking Statements
This press release includes statements of our expectations, intentions, plans and beliefs that
constitute forward looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934 and are intended to come within the
safe harbor protection provided by those sections. These statements, which involve risks and
uncertainties, related to the discussion of our business strategies and our expectations concerning
future operations, margins, sales, new products and brands, potential joint ventures, potential
acquisitions, expenses, profitability, liquidity and capital resources and to analyses and other
information that are based on forecasts of future results and estimates of amounts not yet
determinable. You can identify these and other forward-looking statements by the use of such words
as may, will, should, expects, intends, plans, anticipates, believes, thinks,
estimates, seeks, expects, predicts, could, projects, potential and other similar
terms and phrases, including references to assumptions. These forward looking statements are made
based on expectations and beliefs concerning future events affecting us and are subject to
uncertainties, risks and factors relating to our operations and business environments, all of which
are difficult to predict and many of which are beyond our control, that could cause our actual
results to differ materially from those matters expressed or implied by these forward looking
statements. These risks include our history of losses and expectation of further losses, our
ability to expand our operations in both new and existing markets, our ability to develop or
acquire new brands, our relationships with distributors, the success of our marketing activities,
the effect of competition in our industry and economic and political conditions generally,
including the current economic environment and markets. More information about these and other
factors are described under the caption Risk Factors in Castle Brands Annual Report on Form 10-K
for the year ended March 31, 2014 and other reports we file with the Securities and Exchange
Commission. When considering these forward looking statements, you should keep in mind the
cautionary statements in this press release and the reports we file with the Securities and
Exchange Commission. New risks and uncertainties arise from time to time, and we cannot predict
those events or how they may affect us. We assume no obligation to update any forward looking
statements after the date of this press release as a result of new information, future events or
developments, except as required by the federal securities laws.
1
CASTLE BRANDS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
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Three months ended September 30, |
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Six months ended September 30, |
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2014 |
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2013 |
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2014 |
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2013 |
Sales, net* |
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$ |
13,381,704 |
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$ |
11,659,707 |
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$ |
25,363,903 |
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$ |
22,078,324 |
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Cost of sales* |
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8,498,031 |
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7,475,352 |
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15,933,576 |
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13,975,505 |
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Gross profit |
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4,883,673 |
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4,184,355 |
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9,430,327 |
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8,102,819 |
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Selling expense |
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3,591,823 |
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2,933,150 |
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6,831,149 |
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5,828,533 |
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General and administrative expense |
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1,368,317 |
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1,244,459 |
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2,978,933 |
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2,510,064 |
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Depreciation and amortization |
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215,873 |
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214,638 |
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431,971 |
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427,762 |
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Loss from operations |
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(292,340 |
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(207,892 |
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(811,726 |
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(663,540 |
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Other income (expense), net |
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64 |
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(174 |
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17,006 |
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(174 |
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Loss from equity investment in non-
consolidated affiliate |
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(17,956 |
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(24,077 |
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Foreign exchange loss |
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(29,011 |
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(171,863 |
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(265,458 |
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(111,523 |
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Interest expense, net |
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(288,215 |
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(268,480 |
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(576,857 |
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(497,299 |
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Net change in fair value of warrant liability |
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(3,519,164 |
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(3,966,415 |
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Income tax (expense) benefit, net |
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(259,962 |
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37,038 |
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(422,924 |
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74,076 |
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Net loss |
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(869,464 |
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(4,148,491 |
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(2,059,959 |
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(5,188,952 |
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Net income attributable to noncontrolling
interests |
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(211,049 |
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(278,044 |
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(516,385 |
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(530,416 |
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Net loss attributable to controlling interests |
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(1,080,513 |
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(4,426,535 |
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(2,576,344 |
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(5,719,368 |
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Dividend to preferred shareholders |
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(187,978 |
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(377,910 |
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Net loss attributable to common shareholders |
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$ |
(1,080,513 |
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$ |
(4,614,513 |
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$ |
(2,576,344 |
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$ |
(6,097,278 |
) |
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Net loss per common share, basic and diluted,
attributable to common shareholders |
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$ |
(0.01 |
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$ |
(0.04 |
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$ |
(0.02 |
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$ |
(0.06 |
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Weighted average shares used in computation,
basic and diluted, attributable to common
shareholders |
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155,189,679 |
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110,459,802 |
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154,562,875 |
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109,944,744 |
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Sales, net and Cost of sales include excise taxes of $1,574,437 and $1,588,959 for the three
months ended September 30, 2014 and 2013, respectively, and $3,058,951 and $3,013,179 for the six
months ended September 30, 2014 and 2013, respectively.
2
CASTLE BRANDS INC. AND SUBSIDIARIES
Reconciliation of net loss to EBITDA, as adjusted
(Unaudited)
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Three months ended |
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Six months ended |
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September 30, |
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September 30, |
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2014 |
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2013 |
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2014 |
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2013 |
Net loss attributable to common shareholders |
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$ |
(1,080,513 |
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$ |
(4,614,513 |
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$ |
(2,576,344 |
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$ |
(6,097,278 |
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Adjustments: |
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Interest expense, net |
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288,215 |
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268,480 |
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576,857 |
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497,299 |
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Income tax expense (benefit), net |
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259,962 |
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(37,038 |
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422,924 |
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(74,076 |
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Depreciation and amortization |
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215,873 |
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214,638 |
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431,971 |
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427,762 |
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EBITDA (loss) |
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(316,463 |
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(4,168,433 |
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(1,144,592 |
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(5,246,293 |
) |
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Allowance for doubtful accounts |
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9,000 |
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15,312 |
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68,000 |
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25,812 |
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Stock-based compensation expense |
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208,808 |
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105,216 |
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400,264 |
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177,749 |
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Other (income) expense, net |
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(64 |
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174 |
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(17,006 |
) |
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174 |
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Loss from equity investment in non-consolidated
affiliate |
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17,956 |
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24,077 |
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Foreign exchange loss |
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29,011 |
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171,863 |
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265,458 |
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111,523 |
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Net change in fair value of warrant liability |
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3,519,164 |
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3,966,415 |
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Net income attributable to noncontrolling interests |
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211,049 |
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278,044 |
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516,385 |
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530,416 |
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Dividend to preferred shareholders |
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187,978 |
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377,910 |
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EBITDA, as adjusted |
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141,341 |
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127,274 |
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88,509 |
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(32,217 |
) |
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# # #
Castle Brands Inc.
Investor Relations, 646-356-0200
info@castlebrandsinc.com
www.castlebrandsinc.com
3
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