----

| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|-----------------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

| Florida                                        |   | 41-2103550          |
|------------------------------------------------|--------|---------------------|
| (State or other jurisdiction of                |   | (I.R.S. Employer    |
| incorporation or organization)                 |   | Identification No.) |
|                                           |   |                |
| 122 East 42ndStreet, Suite 4700,          |   | 10168               |
| New York, New York                             |   |  (Zip Code)    |
|  (Address of principal executive offices) |   |                |

|  ̈ Large accelerated filer                                             |   |  ̈ Accelerated filer         |
|----------------------------------------------------------------------------|--------|----------------------------------|
|  ̈ Non-accelerated filer (Do not check if a smaller reporting company) |   | þ Smaller reporting company |

----

| PART I. FINANCIAL INFORMATION |                                                                                                          |   |
|-------------------------------|---------------------------------------------------------------------------------------------------------------|--------|
|                          |                                                                                                          |   |   |
| Item 1.                  | Financial Statements:                                                                                         |   |   |
|                          |                                                                                                          |   |   |
|                          | Condensed Consolidated Balance Sheets as of June 30, 2011 (unaudited) and March 31, 2011            |   |   3 |
|                          |                                                                                                          |   |   |
|                          | Condensed Consolidated Statements of Operations for the three months ended June 30, 2011 and 2010 (unaudited) |   |   4 |
|                          |                                                                                                          |   |   |
|                          | Condensed Consolidated Statement of Changes in Equity for the three months ended June 30, 2011 (unaudited)    |   |   5 |
|                          |                                                                                                          |   |   |
|                          | Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2011 and 2010 (unaudited) |   |   6 |
|                          |                                                                                                          |   |   |
|                          | Notes to Unaudited Condensed Consolidated Financial Statements                                                |   |   7 |
|                          |                                                                                                          |   |   |
| Item 2.                  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                   |   |   15 |
|                          |                                                                                                          |   |   |
| Item 4.                  | Controls and Procedures                                                                                       |   |   21 |
|                          |                                                                                                          |   |   |
| PART II. OTHER INFORMATION    |                                                                                                          |   |
|                          |                                                                                                          |   |   |
| Item 1.                  | Legal Proceedings                                                                                             |   |   22 |
|                          |                                                                                                          |   |   |
| Item 1A.                      | Risk Factors                                                                                                  |   |   22 |
|                          |                                                                                                          |   |   |
| Item 6.                  | Exhibits                                                                                                      |   |   23 |

----

|                                                                                                                                                                                                                                                        |   | June 30, 2011 |                            |   | March 31, 2011 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------------------------------|--------|--------------------------|--------|
|                                                                                                                                                                                                                                                             |   | (Unaudited)             |                            |   |                     |   |
| ASSETS:                                                                                                                                                                                                                                                          |   |                    |                            |   |                     |   |
| Current Assets                                                                                                                                                                                                                                                   |   |                    |                            |   |                     |   |
| Cash and cash equivalents                                                                                                                                                                                                                                        |   | $                       | 2,445,276                       |   |                     | $      | 1,047,372 |   |
| Accounts receivable — net of allowance for doubtful accounts of $468,930 and $461,941, respectively                                                                                                                                                        |   |                    | 4,930,087                       |   |                     |   | 5,636,494 |   |
| Due from shareholders and affiliates                                                                                                                                                                                                                             |   |                    | 112,500                         |   |                     |   | 216,361 |   |
| Inventories— net of allowance for obsolete and slow moving inventory of $204,307 and $207,142, respectively                                                                                                                                                |   |                    | 9,945,524                       |   |                     |   | 9,869,080 |   |
| Prepaid expenses and other current assets                                                                                                                                                                                                                        |   |                    | 912,651                         |   |                     |   | 1,008,885 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Total Current Assets                                                                                                                                                                                                                                             |   |                    | 18,346,038                      |   |                     |   | 17,778,192 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Equipment — net                                                                                                                                                                                                                                            |   |                    | 520,988                         |   |                     |   | 509,554 |   |
| Other Assets                                                                                                                                                                                                                                                     |   |                    |                            |   |                     |   |   |   |
| Investment in non-consolidated affiliate, at equity                                                                                                                                                                                                              |   |                    | 138,116                         |   |                     |   | 155,573 |   |
| Intangible assets — net of accumulated amortization of $4,355,183 and $4,171,882, respectively                                                                                                                                                             |   |                    | 10,816,034                      |   |                     |   | 10,999,335 |   |
| Goodwill                                                                                                                                                                                                                                                         |   |                    | 1,137,290                       |   |                     |   | 1,126,010 |   |
| Restricted cash                                                                                                                                                                                                                                                  |   |                    | 478,084                         |   |                     |   | 468,007 |   |
| Other assets                                                                                                                                                                                                                                                     |   |                    | 79,115                          |   |                     |   | 68,975 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Total Assets                                                                                                                                                                                                                                                     |   | $                       | 31,515,665                      |   |                     | $      | 31,105,646 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| LIABILITIES AND EQUITY:                                                                                                                                                                                                                                          |   |                    |                            |   |                     |   |   |   |
| Current Liabilities                                                                                                                                                                                                                                              |   |                    |                            |   |                     |   |   |   |
| Current maturities of notes payable                                                                                                                                                                                                                              |   | $                       | 3,606,342                       |   |                     | $      | 426,175 |   |
| Accounts payable                                                                                                                                                                                                                                                 |   |                    | 2,781,511                       |   |                     |   | 3,444,813 |   |
| Accrued expenses                                                                                                                                                                                                                                                 |   |                    | 608,212                         |   |                     |   | 733,551 |   |
| Due to shareholders and affiliates                                                                                                                                                                                                                               |   |                    | 1,549,408                       |   |                     |   | 1,734,497 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Total Current Liabilities                                                                                                                                                                                                                                        |   |                    | 8,545,473                       |   |                     |   | 6,339,036 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Long-Term Liabilities                                                                                                                                                                                                                                            |   |                    |                            |   |                     |   |   |   |
| Notes payable                                                                                                                                                                                                                                                    |   |                    | 3,724,250                       |   |                     |   | 5,910,484 |   |
|     Warrant liability                                                                                                                                                                                                                             |   |                    |     371,934 |   |                     |   | — |   |
| Deferred tax liability                                                                                                                                                                                                                                           |   |                    | 1,925,722                       |   |                     |   | 1,962,760 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Total Liabilities                                                                                                                                                                                                                                                |   |                    | 14,567,379                      |   |                     |   | 14,212,280 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Commitments and Contingencies (Note 13)                                                                                                                                                                                                                          |   |                    |                            |   |                     |   |   |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Equity                                                                                                                                                                                                                                                           |   |                    |                            |   |                     |   |   |   |
| Preferred stock, $.01 par value, 25,000,000 shares authorized, 2,155 shares of series A convertible preferred stock issued and outstanding at June 30, 2011 and none outstanding at March 31, 2011, (liquidation value of $2,165,755 at June 30, 2011) |   |                    | 21,550                          |   |                     |   | — |   |
| Common stock, $.01 par value, 225,000,000 shares authorized, 107,202,145 shares issued and outstanding at June 30 and March 31, 2011                                                                                                                             |   |                    | 1,072,021                       |   |                     |   | 1,072,021 |   |
| Additional paid-in capital                                                                                                                                                                                                                                       |   |                    | 137,115,943                     |   |                     |   | 135,468,120 |   |
| Accumulated deficit                                                                                                                                                                                                                                              |   |                    | (120,191,012                    | )      |                     |   | (118,413,246 | ) |
| Accumulated other comprehensive loss                                                                                                                                                                                                                             |   |                    | (1,575,253                      | )      |                     |   | (1,633,502 | ) |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Total controlling shareholders’ equity                                                                                                                                                                                                                |   |                    | 16,443,249                      |   |                     |   | 16,493,393 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Noncontrolling interests                                                                                                                                                                                                                                         |   |                    | 505,037                         |   |                     |   | 399,973 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Total equity                                                                                                                                                                                                                                                     |   |                    | 16,948,286                      |   |                     |   | 16,893,366 |   |
|                                                                                                                                                                                                                                                             |   |                    |                            |   |                     |   |   |   |
| Total Liabilities and Equity                                                                                                                                                                                                                                     |   | $                       | 31,515,665                      |   |                     | $      | 31,105,646 |   |

----

|                                                                                                |   | Three months ended June 30, |        |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|-------------|
|                                                                                                |   | 2011                                            |        |   | 2010 |   |
| Sales, net*                                                                                         |   | $                                               | 7,392,384   |   |   | $ | 6,110,495 |   |
| Cost of sales*                                                                                      |   |                                            | 4,646,095   |   |   |   | 3,884,551 |   |
| Reversal of provision for obsolete inventory                                                        |   |                                            | —     |   |   |   | (24,589 | ) |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Gross profit                                                                                        |   |                                            | 2,746,289   |   |   |   | 2,250,533 |   |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Selling expense                                                                                     |   |                                            | 2,606,781   |   |   |   | 2,511,453 |   |
| General and administrative expense                                                                  |   |                                            | 1,268,400   |   |   |   | 1,244,999 |   |
| Depreciation and amortization                                                                       |   |                                            | 228,145     |   |   |   | 235,731 |   |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Loss from operations                                                                                |   |                                            | (1,357,037  | ) |   |   | (1,741,650 | ) |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Other income                                                                                        |   |                                            | —     |   |   |   | 957 |   |
| Loss from equity investment in non-consolidated affiliate                                           |   |                                            | (17,457     | ) |   |   | — |   |
| Foreign exchange (loss) gain                                                                        |   |                                            | (122,076    | ) |   |   | 57,515 |   |
| Interest expense, net                                                                               |   |                                            | (177,541    | ) |   |   | (25,543 | ) |
| Net change in fair value of warrant liability                                             |   |                                            | (24,874     | )  |   |   | — |   |
| Income tax benefit                                                                                  |   |                                            | 37,038      |   |   |   | 37,038 |   |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Net loss                                                                                            |   |                                            | (1,661,947  | ) |   |   | (1,671,683 | ) |
| Net income attributable to noncontrolling interests                                                 |   |                                            | (105,064    | ) |   |   | (51,125 | ) |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Net loss attributable to controlling interests                                                      |   |                                            | (1,767,011  | ) |   |   | (1,722,808 | ) |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Dividend to preferred shareholders                                                                  |   |                                            | (329,460    | )  |   |   | - |   |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Net loss attributable to common shareholders                                                        |   | $                                               | (2,096,471  | )  |   | $  | (1,722,808 | )  |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Net loss per common share, basic and diluted, attributable to common shareholders                   |   | $                                               | (0.02       | ) |   | $ | (0.02 | ) |
|                                                                                                |   |                                            |        |   |   |   |   |   |
| Weighted average shares used in computation, basic and diluted, attributable to common shareholders |   |                                            | 107,202,145 |   |   |   | 108,103,518 |   |

----

|                                                                               |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   |        | Accumulated        |   |   |          |   |   |   |       |
|------------------------------------------------------------------------------------|--------|-----------------|---------|--------|-------------------|--------|---------|---------|--------|--------|-------------|--------|--------|---------------|-----------|--------|----------------|--------|-------------|--------------------|--------|--------|---------------|--------|--------|--------|------------|
|                                                                               |   |            |    |   |              |   |    |    |   |   |        |   |   | Additional    |      |   |           |   |        | Other              |   |   |          |   |   |   |       |
|                                                                               |   | Preferred Stock |    |   | Common Stock |   |    | Paid-in |   |   | Accumulated |   |   | Comprehensive |      |   | Noncontrolling |   |        | Total              |   |
|                                                                               |   | Shares          |    |   | Amount            |   |    | Shares  |   |   | Amount      |   |   | Capital       |      |   | Deficit        |   |        | Income (Loss) |   |   | Interests     |   |   | Equity |       |
| BALANCE, MARCH 31, 2011                                                            |   |            | — |   |              | $      | — |    |   |   | 107,202,145 |   |   | $             | 1,072,021 |   |           | $      | 135,468,120 |               |   | $      | (118,413,246  | )      |   | $      | (1,633,502 | ) |   | $ | 399,973 |   |   | $ | 16,893,366 |   |
|                                                                               |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   |        |               |   |   |          |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Comprehensive loss                                                                 |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   |        |               |   |   |          |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                                  |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   |        |               |   |   | (1,767,011    | )      |   |   |       |   |   |   | 105,064 |   |   |   | (1,661,947 | ) |
| Foreign currency translation adjustment                                            |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   |        |               |   |   |          |   |   |   | 58,249     |   |   |   |   |   |   |   | 58,249 |   |
|                                                                               |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   |        |               |   |   |          |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Total comprehensive loss                                                           |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   |        |               |   |   |          |   |   |   |       |   |   |   |   |   |   |   | (1,603,698 | ) |
| Issuance of  series A convertible preferred stock, net of issuance costs |   |            | 2,155   |   |              |   | 21,550  |    |   |   |        |   |   |          |      |   |           |   | 1,605,291   |               |   |   |          |   |   |   |       |   |   |   |   |   |   |   | 1,626,841 |   |
| Accrued dividends - series A convertible      preferred stock  |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   | 10,755      |               |   |   |  (10,755 | )      |   |   |       |   |   |   |   |   |   |   | — |   |
| Stock-based compensation                                                           |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   | 31,777      |               |   |   |          |   |   |   |       |   |   |   |   |   |   |   | 31,777 |   |
|                                                                               |   |            |    |   |              |   |    |    |   |   |        |   |   |          |      |   |           |   |        |               |   |   |          |   |   |   |       |   |   |   |   |   |   |   |   |   |
| BALANCE, JUNE 30, 2011                                                             |   |            | 2,155   |   |              | $      | 21,550  |    |   |   | 107,202,145 |   |   | $             | 1,072,021 |   |           | $      | 137,115,943 |               |   | $      | (120,191,012  | )      |   | $      | (1,575,253 | ) |   | $ | 505,037 |   |   | $ | 16,948,286 |   |

----

|                                                                                       |   | Three months ended June 30, |          |
|--------------------------------------------------------------------------------------------|--------|-------------------------------------------------|---------------|
|                                                                                       |   | 2011                                            |          |   | 2010 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                      |   |                                            |          |   |   |   |
| Net loss                                                                                   |   | $                                               | (1,661,947    | ) |   | $ | (1,671,683 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities:                |   |                                            |          |   |   |   |   |   |
| Depreciation and amortization                                                              |   |                                            | 228,145       |   |   |   | 235,731 |   |
| Provision for doubtful accounts                                                            |   |                                            | 6,911         |   |   |   | 14,800 |   |
| Amortization of deferred financing costs                                                   |   |                                            | 4,860         |   |   |   | 2,083 |   |
| Change in fair value of warrant liability                                                  |   |                                            | 24,874        |   |   |   | — |   |
| Deferred tax benefit                                                                       |   |                                            | (37,038       | ) |   |   | (37,038 | ) |
| Loss from equity investment in non-consolidated affiliate                                  |   |                                            | 17,457        |   |   |   | — |   |
| Effect of changes in foreign exchange                                                      |   |                                            | 31,487        |   |   |   | (68,393 | ) |
| Stock-based compensation expense                                                           |   |                                            | 31,777        |   |   |   | 36,289 |   |
| Provision for obsolete inventories                                                         |   |                                            | —       |   |   |   | (24,589 | ) |
| Changes in operations, assets and liabilities:                                             |   |                                            |          |   |   |   |   |   |
| Accounts receivable                                                                        |   |                                            | 711,833       |   |   |   | 12,063 |   |
| Due from affiliates                                                                        |   |                                            | 103,861       |   |   |   | 2,192 |   |
| Inventory                                                                                  |   |                                            | (54,221       | ) |   |   | (872,818 | ) |
| Prepaid expenses and supplies                                                              |   |                                            | 97,324        |   |   |   | (193,189 | )  |
| Accounts payable and accrued expenses                                                      |   |                                            | (816,322      | ) |   |   | (860,734 | ) |
| Due to related parties                                                                     |   |                                            | (185,089      | ) |   |   | 1,007,875 |   |
| Accrued interest                                                                      |   |                                            | 95,850        |   |   |   | — |   |
| Other assets                                                                               |   |                                            | (15,000       | )  |   |   |   |   |
|                                     |   |                                            |          |   |   |   |   |   |
| Total adjustments                                                                          |   |                                            | 246,709       |   |   |   | (745,728 | ) |
|                                                                                       |   |                                            |          |   |   |   |   |   |
| NET CASH USED IN OPERATING ACTIVITIES                                                      |   |                                            | (1,415,238    | ) |   |   | (2,417,411 | ) |
|                                                                                       |   |                                            |          |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                      |   |                                            |          |   |   |   |   |   |
| Purchase of equipment                                                                      |   |                                            | (51,372       | ) |   |   | (23,242 | ) |
| Acquisition of intangible assets                                                           |   |                                            | —       |   |   |   | (6,537 | ) |
| Change in restricted cash                                                                  |   |                                            | (394          | ) |   |   | 235,706 |   |
| Payments under contingent consideration agreements                                         |   |                                            | (11,280       | ) |   |   | (35,448 | ) |
|                                                                                       |   |                                            |          |   |   |   |   |   |
| NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                                        |   |                                            | (63,046       | ) |   |   | 170,479 |   |
|                                                                                       |   |                                            |          |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                      |   |                                            |          |   |   |   |   |   |
| Credit facilities — net                                                              |   |                                            | —       |   |   |   | 1,000,000 |   |
| Note payable — Betts & Scholl                                                    |   |                                            | (106,918      | ) |   |   | (106,024 | ) |
| Promissory note – Frost Gamma Investments Trust                                      |   |                                            | —       |   |   |   | 2,000,000 |   |
| Interim notes – affiliate investors                                                  |   |                                            | 1,005,000     |   |   |   | — |   |
| Issuance of series A convertible preferred stock                                           |   |                                            | 2,155,000     |   |   |   | — |   |
| Costs of issuance                                                                          |   |                                            | (181,100      | ) |   |   | — |   |
| Proceeds from stock option exercises                                                       |   |                                            | —       |   |   |   | 7,875 |   |
| Repurchase of common stock                                                                 |   |                                            | —       |   |   |   | (1,023,475 | ) |
|                                                                                       |   |                                            |          |   |   |   |   |   |
| NET CASH PROVIDED BY FINANCING ACTIVITIES                                                  |   |                                            | 2,871,982     |   |   |   | 1,878,376 |   |
|                                                                                       |   |                                            |          |   |   |   |   |   |
| EFFECTS OF FOREIGN CURRENCY TRANSLATION                                                    |   |                                            | 4,206         |   |   |   | (23,130 | ) |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       |   |                                            | 1,397,904     |   |   |   | (391,686 | ) |
| CASH AND CASH EQUIVALENTS — BEGINNING                                                |   |                                            | 1,047,372     |   |   |   | 1,281,141 |   |
|                                                                                       |   |                                            |          |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS — ENDING                                                   |   | $                                               | 2,445,276     |   |   | $ | 889,455 |   |
|                                                                                       |   |                                            |          |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES:                                                                  |   |                                            |          |   |   |   |   |   |
| Schedule of non-cash investing and financing activities:                                   |   |                                            |          |   |   |   |   |   |
| Issuance of warrant liability in connection with series A convertible preferred stock |   | $                                               |  347,059 |   |   | $ |  — |   |
| Issuance of common stock in exchange for fine wine inventory in June 2010                  |   | $                                               | —       |   |   | $ | 840,000 |   |
|                                                                                  |   |                                            |          |   |   |   |   |   |
| Interest paid                                                                              |   | $                                               | 69,389        |   |   | $ | 21,003 |   |

----

|   | A. | Description of business and business combination — The consolidated financial statements include the accounts of the Castle Brands Inc., its wholly-owned subsidiaries, Castle Brands (USA) Corp. (“CB-USA”), McLain & Kyne, Ltd. (“McLain & Kyne”), the Company’s wholly-owned foreign subsidiaries, Castle Brands Spirits Group Limited (“CB-IRL”) and Castle Brands Spirits Marketing and Sales Company Limited, and the Company’s 60% ownership interest in Gosling-Castle Partners, Inc. (“GCP”), with adjustments for income or loss allocated based upon percentage of ownership. The accounts of the subsidiaries have been included as of the date of acquisition. All significant intercompany transactions and balances have been eliminated. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Organization and operations — The Company is principally engaged in the importation, marketing and sale of premium and super premium brands of rums, whiskey, liqueurs, vodka, tequila and wine in the United States, Canada, Europe, Latin America and the Caribbean. The vodka, Irish whiskeys and certain liqueurs are procured by CB-IRL, billed in Euros and imported from Europe into the United States. The risk of fluctuations in foreign currency is borne by the U.S. entities. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | Equity investments - Equity investments are carried at original cost adjusted for the Company’s proportionate share of the investees’ income, losses and distributions. The Company assesses the carrying value of its equity investments when an indicator of a loss in value is present and records a loss in value of the investment when the assessment indicates that an other-than-temporary decline in the investment exists. The Company classifies its equity earnings of non-consolidated affiliate equity investment as a component of net income or loss. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | D. | Goodwill and other intangible assets — Goodwill represents the excess of purchase price including related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Goodwill and other identifiable intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, or more frequently if circumstances indicate a possible impairment may exist. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives, generally on a straight-line basis, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | E. | Impairment of long-lived assets — Under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 310, “Accounting for the Impairment or Disposal of Long-lived Assets”, the Company periodically reviews whether changes have occurred that would require revisions to the carrying amounts of its definite lived, long-lived assets. When the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized based on the fair value of the asset. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | F. | Excise taxes and duty — Excise taxes and duty are computed at standard rates based on alcohol proof per gallon/liter and are paid after finished goods are imported into the United States and then transferred out of “bond.” Excise taxes and duty are recorded to inventory as a component of the cost of the underlying finished goods. When the underlying products are sold “ex warehouse”, the sales price reflects the taxes paid and the inventoried excise taxes and duties are charged to cost of sales. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | G. | Foreign currency — The functional currency for the Company’s foreign operations is the Euro in Ireland and the British Pound in the United Kingdom. Under ASC 830, “Foreign Currency Matters”, 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 shown as a separate line item in the consolidated statements of operations. The Company’s vodka, Irish whiskeys and certain liqueurs are procured by CB-IRL and billed in Euros to CB-USA, with the risk of foreign exchange gain or loss resting with CB-USA. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | H. | Fair value of financial instruments — ASC 825, “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 Company’s balance sheets due to the short term maturity of these instruments, or with respect to the Company’s debt, as compared to the current borrowing rates available to the Company. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Establishes a three-level hierarchy (“valuation hierarchy”) for fair value measurements; |
|--------|---------|------------------------------------------------------------------------------------------------------|

|   | • | Requires consideration of the Company’s creditworthiness when valuing liabilities; and |
|--------|---------|----------------------------------------------------------------------------------------------|

|   | • | Expands disclosures about instruments measured at fair value. |
|--------|---------|---------------------------------------------------------------|

|   | • | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are directly or indirectly observable for the asset or liability for substantially the full term of the financial instrument. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------|

|   | I. | Income taxes — Under ASC 740, “Income Taxes”, 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. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | J. | Recent accounting pronouncements — In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income ("ASU 2011-05"), which revises the manner in which entities present comprehensive income in their financial statements. The new guidance amends ASC No. 220, Comprehensive Income, and gives reporting entities the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. ASU 2011-05 does not change the items that must be reported in other comprehensive income. This new guidance is effective for reporting periods beginning after December 15, 2011 and is to be applied retrospectively. The Company does not expect the adoption of the standard to have a material impact on the Company’s results of operations, cash flows or financial condition. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                              |   | Three months ended |       |
|-----------------------------------|--------|------------------------------|------------|
|                              |   | June 30,                |       |
|                              |   | 2011                         |       |   | 2010 |   |
| Stock options                     |   |                         | 6,095,500  |   |   |   | 4,379,000 |   |
| Warrants to purchase common stock |   |                         | 5,471,227  |   |   |   | 2,016,814 |   |
| Convertible preferred stock  |   |                         | 7,088,820  |   |   |   | - |   |
|                              |   |                         |       |   |   |   |   |   |
| Total                             |   |                         | 18,655,547 |   |   |   | 6,395,814 |   |

|                       |   | June 30, |            |   | March 31, |   |
|----------------------------|--------|----------|-----------------|--------|-----------|--------|
|                       |   | 2011     |            |   | 2011      |   |
| Raw materials              |   | $        | 2,542,142       |   |      | $      | 2,318,260 |   |
| Finished goods – net |   |     |  7,403,382 |   |      |   | 7,550,820 |   |
|                       |   |     |            |   |      |   |   |   |
| Total                      |   | $        | 9,945,524       |   |      | $      | 9,869,080 |   |

----

|                                     |   | Amount |      |
|------------------------------------------|--------|--------|-----------|
| Balance as of March 31, 2011        |   | $      | 1,126,010 |   |
|                                     |   |   |      |   |
| Payments under McLain and Kyne agreement |   |   | 11,280    |   |
|                                     |   |   |      |   |
| Balance as of June 30, 2011              |   | $      | 1,137,290 |   |

|                                                           |   | June 30, |       |   | March 31, |   |
|----------------------------------------------------------------|--------|----------|------------|--------|-----------|--------|
|                                                           |   | 2011     |       |   | 2011      |   |
| Definite life brands                                           |   | $        | 170,000    |   |      | $      | 170,000 |   |
| Trademarks                                                     |   |     | 535,948    |   |      |   | 535,948 |   |
| Rights                                                         |   |     | 8,271,555  |   |      |   | 8,271,555 |   |
| Distributor relationships                                      |   |     | 664,000    |   |      |   | 664,000 |   |
| Product development                                            |   |     | 28,262     |   |      |   | 28,262 |   |
| Patents                                                        |   |     | 994,000    |   |      |   | 994,000 |   |
| Other                                                          |   |     | 28,480     |   |      |   | 28,480 |   |
|                                                           |   |     |       |   |      |   |   |   |
|                                                           |   |     | 10,692,245 |   |      |   | 10,692,245 |   |
| Less: accumulated amortization                                 |   |     | 4,355,183  |   |      |   | 4,171,882 |   |
|                                                           |   |     |       |   |      |   |   |   |
| Net                                                            |   |     | 6,337,062  |   |      |   | 6,520,363 |   |
| Other identifiable intangible assets — indefinite lived* |   |     | 4,478,972  |   |      |   | 4,478,972 |   |
|                                                           |   |     |       |   |      |   |   |   |
|                                                           |   | $        | 10,816,034 |   |      | $      | 10,999,335 |   |

|                      |   | June 30, |      |   | March 31, |   |
|---------------------------|--------|----------|-----------|--------|-----------|--------|
|                      |   | 2011     |      |   | 2011      |   |
| Definite life brands      |   | $        | 152,051   |   |      | $      | 149,218 |   |
| Trademarks                |   |     | 172,311   |   |      |   | 164,015 |   |
| Rights                    |   |     | 3,443,309 |   |      |   | 3,305,321 |   |
| Distributor relationships |   |     | 116,200   |   |      |   | 99,600 |   |
| Product development       |   |     | 9,158     |   |      |   | 8,140 |   |
| Patents                   |   |     | 462,154   |   |      |   | 445,588 |   |
|                      |   |     |      |   |      |   |   |   |
| Accumulated amortization  |   | $        | 4,335,183 |   |      | $      | 4,171,882 |   |

|                                    |   | June 30, |      |   | March 31, |   |
|-----------------------------------------|--------|----------|-----------|--------|-----------|--------|
|                                    |   | 2011     |      |   | 2011      |   |
| Notes payable consist of the following: |   |     |      |   |      |   |
| Note payable (A)                        |   | $        | 325,163   |   |      | $      | 426,175 |   |
| Note payable (B)                        |   |     | 214,225   |   |      |   | 211,580 |   |
| Credit agreement (C)                    |   |     | 2,500,000 |   |      |   | 2,500,000 |   |
| Note payable (D)                        |   |     | 2,225,425 |   |      |   | 2,170,575 |   |
| Note payable (E)                        |   |     | 1,055,753 |   |      |   | 1,028,329 |   |
| Note payable (F)                        |   |     | 1,010,025 |   |      |   | — |   |
|                                    |   |     |      |   |      |   |   |   |
| Total                                   |   | $        | 7,330,591 |   |      | $      | 6,336,659 |   |

----

|   | A. | In connection with the Betts & Scholl asset acquisition in September 2009, the Company issued a secured promissory note in the aggregate principal amount of $1,094,541 to Betts & Scholl, LLC, an entity affiliated with Dennis Scholl, who became a director of the Company at the time of the acquisition. This note is secured by the Betts & Scholl inventory acquired by the Company under a security agreement. This note provides for an initial payment of $250,000, paid at closing, and for eight equal quarterly payments of principal and interest, with the final payment due on September 21, 2011. Interest under this note accrues at an annual rate of 0.84%, compounded quarterly. This note contains customary events of default, which if uncured, entitle the holder to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the note. In December 2010, the Company entered into a letter agreement with Betts & Scholl, LLC amending the terms of the note, which provides that the quarterly installment payments of principal and interest due December 21, 2010 and March 21, 2011, each in the amount of approximately $107,000, will not be due and payable until the maturity date of such note and that such installment payments will bear interest, payable on such maturity date, at the rate of 11% per annum, compounded quarterly. At June 30, 2011, $325,163, consisting of $314,145 of principal and $11,018 of accrued interest, due on this note is included in current liabilities. Approximately $107,000 of this note will be converted into Series A Preferred Stock and 2011 Warrants (each as defined in Note 9) as part of the private placement transaction described in Note 9, if shareholder approval of such transaction is obtained. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | In December 2009, GCP issued a promissory note (the “GCP Note”) in the aggregate principal amount of $211,580 to Gosling's Export (Bermuda) Limited in exchange for credits issued on certain inventory purchases. The GCP Note matures on April 1, 2020, is payable at maturity, subject to certain acceleration events, and calls for annual interest of 5%, to be accrued and paid at maturity. At June 30, 2011, $214,225, consisting of $211,580 of principal and $2,645 of accrued interest, due on the GCP Note is included in long-term liabilities. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | In December 2009, the Company entered into a $2,500,000 revolving credit agreement with, among others, Frost Gamma Investments Trust, an entity affiliated with Phillip Frost, M.D., a director and principal shareholder of the Company, Vector Group Ltd., a principal shareholder of the Company, Lafferty Ltd., a principal shareholder of the Company, IVC Investors, LLLP, an entity affiliated with Glenn Halpryn, a director of the Company, Mark E. Andrews, III, the Company’s Chairman, and Richard J. Lampen, the Company’s President and Chief Executive Officer. Under the credit agreement, the Company may borrow from time to time up to $2,500,000 to be used for working capital or general corporate purposes. Borrowings under the credit agreement mature on April 1, 2013 and bear interest at a rate of 11% per annum, payable quarterly. The credit agreement provides for the payment of an aggregate commitment fee of $75,000 payable to the lenders over the three-year period. The note issued under the credit agreement contains customary events of default, which if uncured, entitle the holders to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, such note. Amounts may be repaid and reborrowed under the revolving credit agreement without penalty. The note is secured by the inventory and trade accounts receivable of CB-USA, subject to certain exceptions, pursuant to a security agreement. Borrowings under this facility occurred as follows: $1,000,000 on April 23, 2010, $1,000,000 on September 14, 2010 and $500,000 on October 22, 2010. At June 30, 2011, $2,500,000 of principal due on this credit agreement was outstanding and is included in long-term liabilities. Approximately $500,000 outstanding under this facility, and accrued but unpaid interest thereon, will be converted into Series A Preferred Stock and 2011 Warrants as part of the private placement transaction described in Note 9, if shareholder approval of such transaction is obtained. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | D. | In June 2010, the Company issued a $2,000,000 promissory note to Frost Gamma Investments Trust. Borrowings under the note mature on June 21, 2012 and bear interest at a rate of 11% per annum. Interest accrues quarterly and is payable at maturity. The note may be prepaid in whole or in part at any time prior to maturity without penalty, but with payment of accrued interest to the date of prepayment. At June 30, 2011, $2,225,425, consisting of $2,000,000 of principal and $225,425 of accrued interest is included in current liabilities in respect of the Frost Note. This note, and accrued but unpaid interest thereon, will be converted into Series A Preferred Stock and 2011 Warrants as part of the private placement transaction described in Note 9, if shareholder approval of such transaction is obtained. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | E. | In December 2010, the Company issued promissory notes in the aggregate principal amount of $1,000,000 to Frost Gamma Investments Trust, Vector Group Ltd., IVC Investors, LLLP, Mark E. Andrews, III and Richard J. Lampen. Borrowings under these notes mature on June 21, 2012 and bear interest at a rate of 11% per annum. Interest accrues quarterly and is payable at maturity. These notes may be prepaid in whole or in part at any time prior to maturity without penalty, but with payment of accrued interest to the date of prepayment. At June 30, 2011, $1,055,753, consisting of $1,000,000 of principal and $55,753 of accrued interest is included in current liabilities in respect of these notes. These notes, and accrued but unpaid interest thereon, will be converted into Series A Preferred Stock and 2011 Warrants as part of the private placement transaction described in Note 9, if shareholder approval of such transaction is obtained. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | F. | In June 2011, certain directors, officers and other affiliates of the Company agreed to purchase an aggregate of $1,005,000 of Series A Preferred Stock and 2011 Warrants as part of the private placement transaction described in Note 9, subject to shareholder approval of such issuance in accordance with NYSE Amex rules.  Pending such shareholder approval, the Company issued an aggregate of $1,005,000 in promissory notes to these affiliate purchasers, which notes and accrued but unpaid interest thereon will convert automatically into Series A Preferred Stock and 2011 Warrants if shareholder approval of such transaction is obtained.  These notes bear interest at 10% per annum and mature 18 months from the date of issuance, subject to prior conversion upon shareholder approval.  The affiliate purchasers include Frost Gamma Investments Trust, Richard Lampen, Mark Andrews and certain of his affiliates, John Glover, the Company’s Chief Operating Officer, and Alfred J. Small, the Company’s Senior Vice President, Chief Financial Officer, Treasurer and Secretary. At June 30, 2011, $1,010,025, consisting of $1,005,000 of principal and $5,025 of accrued interest, is included in long-term liabilities in respect of these notes.  |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | 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 2022, subject to annual extensions thereafter, provided that the Company and Irish Distillers agree on the amount of liters of pure alcohol to be provided in the following year. 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 contract year and contracts to purchase that amount. For the contract year ending June 30, 2012, the Company has contracted to purchase approximately €545,262 or $784,610 (translated at the June 30, 2011 exchange rate) in bulk Irish whiskey. The Company is not obligated to pay Irish Distillers for any product not yet received. During the term of this supply agreement, Irish Distillers has the right to limit additional purchases above the commitment amount. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | The Company leases office space in New York, NY, Dublin, Ireland and Houston, TX. The New York, NY lease began on May 1, 2010 and expires on April 30, 2012 and provides for monthly payments of $16,779. The Dublin lease commenced on March 1, 2009 and extends through November 30, 2013 and provides for monthly payments of €1,250 or $1,799 (translated at the June 30, 2011 exchange rate) for the balance of the lease term. The Houston, TX lease commenced on February 24, 2000 and extends through January 31, 2012 and provides for monthly payments of $1,693. The Company has also entered into non-cancelable operating leases for certain office equipment. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A. | Credit Risk — The Company maintains its cash and cash equivalents balances at various large financial institutions that, at times, may exceed federally and internationally insured limits. The Company did not exceed the limits in effect as of June 30, 2011 and exceeded insured limits in effect at June 30, 2010 by approximately $65,000. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Customers — Sales to three customers accounted for approximately 43.0% of the Company’s revenues for the three months ended June 30, 2011 (of which one customer accounted for 27.5%) and approximately 36.4% of accounts receivable at June 30, 2011. Sales to three customers accounted for approximately 43.5% of the Company’s revenues for the three months ended June 30, 2010 (of which one customer accounted for 27.1%) and approximately 43.7% of accounts receivable at June 30, 2010. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                            |   | Three Months ended June 30, |       |
|-----------------------------------------------------------------|--------|----------------------------------|------------|
|                                                            |   | 2011                             |       |   | 2010 |   |
| Consolidated Revenue:                                           |   |                             |       |   |   |   |   |   |   |   |   |   |
| International                                                   |   | $                                | 961,452    |   |   |   | 13.0 | % |   | $ | 795,986 |   |   |   | 13.0 | % |
| United States                                                   |   |                             | 6,430,932  |   |   |   | 87.0 | % |   |   | 5,314,509 |   |   |   | 87.0 | % |
|                                                            |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Consolidated Revenue                                      |   | $                                | 7,392,384  |   |   |   | 100.0 | % |   | $ | 6,110,495 |   |   |   | 100.0 | % |
|                                                            |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated Results from Operations:                           |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| International                                                   |   | $                                | (24,317    | ) |   |   | 1.8 | % |   | $ | 15,318 |   |   |   | (1.0 | )% |
| United States                                                   |   |                             | (1,332,720 | ) |   |   | 98.2 | % |   |   | (1,756,968 | ) |   |   | 101.0 | % |
|                                                            |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Consolidated Results from Operations                      |   | $                                | (1,357,037 | ) |   |   | 100.0 | % |   | $ | (1,741,650 | ) |   |   | 100.0 | % |
|                                                            |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated Net Loss Attributable to Common Shareholders:      |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| International                                                   |   | $                                | (186,575   | ) |   |   | 8.9 | % |   | $ | (59,586 | ) |   |   | 3.5 | % |
| United States                                                   |   |                             | (1,909,896 | ) |   |   | 91.1 | % |   |   | (1,663,222 | ) |   |   | 96.5 | % |
|                                                            |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Consolidated Net Loss Attributable to Common Shareholders |   | $                                | (2,096,471 | ) |   |   | 100.0 | % |   | $ | (1,722,808 | ) |   |   | 100.0 | % |
|                                                            |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax benefit:                                             |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| United States                                                   |   |                             | 37,038     |   |   |   | 100.0 | % |   |   | 37,038 |   |   |   | 100.0 | % |
|                                                            |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Consolidated Revenue by category:                         |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rum                                                             |   | $                                | 3,096,755  |   |   |   | 41.9 | % |   | $ | 2,679,634 |   |   |   | 43.9 | % |
| Liqueurs                                                        |   |                             | 1,470,015  |   |   |   | 19.9 | % |   |   | 1,190,318 |   |   |   | 19.5 | % |
| Whiskey                                                         |   |                             | 941,890    |   |   |   | 12.7 | % |   |   | 869,420 |   |   |   | 14.2 | % |
| Vodka                                                           |   |                             | 985,355    |   |   |   | 13.3 | % |   |   | 820,404 |   |   |   | 13.4 | % |
| Tequila                                                         |   |                             | 92,494     |   |   |   | 1.3 | % |   |   | 73,600 |   |   |   | 1.2 | % |
| Wine                                                            |   |                             | 303,478    |   |   |   | 4.1 | % |   |   | 170,001 |   |   |   | 2.8 | % |
| Other*                                                          |   |                             | 502,397    |   |   |   | 6.8 | % |   |   | 307,118 |   |   |   | 5.0 | % |
|                                                            |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Consolidated Revenue                                      |   | $                                | 7,392,384  |   |   |   | 100.0 | % |   | $ | 6,110,495 |   |   |   | 100.0 | % |

|                      |   | As of June 30, 2011 |       |   | As of March 31, 2011 |   |
|---------------------------|--------|---------------------|------------|--------|----------------------|--------|
| Consolidated Assets:      |   |                |       |   |                 |   |   |   |   |   |   |   |
| International             |   | $                   | 2,300,675  |   |                 |   | 7.3 | % |   |   | 2,640,896 |   |   |   | 8.5 | % |
| United States             |   |                | 29,214,990 |   |                 |   | 92.7 | % |   |   | 28,464,750 |   |   |   | 91.5 | % |
|                      |   |                |       |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Total Consolidated Assets |   | $                   | 31,515,665 |   |                 |   | 100.0 | % |   |   | 31,105,646 |   |   |   | 100.0 | % |

----

----

|   | • | increase revenues from our more profitable brands. We continue to focus our distribution relationships, sales expertise and targeted marketing activities on our more profitable brands; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | improve value chain and manage cost structure. We have undergone a comprehensive review and analysis of our supply chains and cost structures both on a company-wide and brand-by-brand basis. This included personnel reductions throughout our company; restructuring our international distribution system; reducing inventory levels; changing distributor relationships in certain markets; moving production of certain products to a lower cost facility in the U.S.; and reducing general and administrative costs. We continue to review costs and seek to reduce expense; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | selectively add new premium brands to our portfolio. We intend to continue developing new brands and pursuing strategic relationships, joint ventures and acquisitions to selectively expand our premium spirits and fine wine portfolio, particularly by capitalizing on and expanding our partnering capabilities. Our criteria for new brands focuses on underserved areas of the beverage alcohol marketplace, while examining the potential for direct financial contribution to our company and the potential for future growth based on development and maturation of agency brands. We evaluate future acquisitions and agency relationships on the basis of their potential to be immediately accretive and their potential contributions to our objectives of becoming profitable and further expanding our product offerings. We expect that future acquisitions, if consummated, would involve some combination of cash, debt and the issuance of our stock. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                |   | Three Months ended |   |
|---------------------|--------|--------------------|--------|
|                |   | June 30,           |   |
|                |   | 2011               |   |   | 2010 |   |
| Cases               |   |               |   |   |   |   |
| United States       |   |               | 56,184 |   |   |   | 45,842 |   |
| International       |   |               | 13,935 |   |   |   | 12,968 |   |
|                |   |               |   |   |   |   |   |   |
| Total               |   |               | 70,119 |   |   |   | 58,810 |   |
|                |   |               |   |   |   |   |   |   |
| Rum                 |   |               | 30,792 |   |   |   | 26,432 |   |
| Vodka               |   |               | 18,165 |   |   |   | 14,910 |   |
| Liqueurs            |   |               | 13,281 |   |   |   | 11,123 |   |
| Whiskey             |   |               | 5,481  |   |   |   | 5,363 |   |
| Tequila             |   |               | 479    |   |   |   | 258 |   |
| Wine                |   |               | 1,766  |   |   |   | 724 |   |
| Other               |   |               | 155    |   |   |   | — |   |
|                |   |               |   |   |   |   |   |   |
| Total               |   |               | 70,119 |   |   |   | 58,810 |   |
|                |   |               |   |   |   |   |   |   |
| Percentage of Cases |   |               |   |   |   |   |   |   |
| United States       |   |               | 80.1   | % |   |   | 77.9 | % |
| International       |   |               | 19.9   | % |   |   | 22.1 | % |
|                |   |               |   |   |   |   |   |   |
| Total               |   |               | 100.0  | % |   |   | 100.0 | % |
|                |   |               |   |   |   |   |   |   |
| Rum                 |   |               | 43.9   | % |   |   | 44.9 | % |
| Vodka               |   |               | 25.9   | % |   |   | 25.5 | % |
| Liqueurs            |   |               | 18.9   | % |   |   | 18.9 | % |
| Whiskey             |   |               | 7.8    | % |   |   | 9.1 | % |
| Tequila             |   |               | 0.7    | % |   |   | 0.4 | % |
| Wine                |   |               | 2.5    | % |   |   | 1.2 | % |
| Other               |   |               | 0.2    | % |   |   | 0.0 | % |
|                |   |               |   |   |   |   |   |   |
| Total               |   |               | 100.0  | % |   |   | 100.0 | % |

|                                                      |   | Three Months ended |    |
|-----------------------------------------------------------|--------|--------------------|---------|
|                                                      |   | June 30,           |    |
|                                                      |   | 2011               |    |   | 2010 |   |
| Sales, net                                                |   |               | 100.0   | % |   |   | 100.0 | % |
| Cost of sales                                             |   |               | 62.8    | % |   |   | 63.6 | % |
| Reversal of provision for obsolete inventory              |   |               | — | % |   |   | (0.4 | )% |
|                                                      |   |               |    |   |   |   |   |   |
| Gross profit                                              |   |               | 37.2    | % |   |   | 36.8 | % |
|                                                      |   |               |    |   |   |   |   |   |
| Selling expense                                           |   |               | 35.3    | % |   |   | 41.1 | % |
| General and administrative expense                        |   |               | 17.2    | % |   |   | 20.4 | % |
| Depreciation and amortization                             |   |               | 3.1     | % |   |   | 3.9 | % |
|                                                      |   |               |    |   |   |   |   |   |
| Loss from operations                                      |   |               | (18.4   | )% |   |   | (28.6 | )% |
|                                                      |   |               |    |   |   |   |   |   |
| Other income                                              |   |               | 0.0     | % |   |   | (0.0 | )% |
| Loss from equity investment in non-consolidated affiliate |   |               | (0.2    | )% |   |   | 0.0 | % |
| Foreign exchange (loss) gain                              |   |               | (1.7    | )% |   |   | 0.9 | % |
| Interest (expense) income, net                            |   |               | (2.4    | )% |   |   | (0.4 | )% |
| Net change in fair value of warrant liability             |   |               | (0.3    | )% |   |   | — |   |
| Income tax benefit                                        |   |               | 0.5     | % |   |   | 0.6 | % |
|                                                      |   |               |    |   |   |   |   |   |
| Net loss                                                  |   |               | (22.5   | )% |   |   | (27.5 | )% |
| Net income attributable to noncontrolling interests       |   |               | (1.4    | )% |   |   | (0.8 | )% |
|                                                      |   |               |    |   |   |   |   |   |
| Net loss attributable to controlling interests            |   |               | (23.9   | )% |   |   | (28.3 | )% |
|                                                      |   |               |    |   |   |   |   |   |
| Dividend to prefered shareholders                         |   |               | (4.5    | )%  |   |   | 0.0 | % |
|                                                      |   |               |    |   |   |   |   |   |
| Net loss attributable to common shareholders              |   |               | (28.4   | )%  |   |   | (28.3 | )%  |

----

|                                                      |   | Three Months ended |       |
|-----------------------------------------------------------|--------|--------------------|------------|
|                                                      |   | June 30,           |       |
|                                                      |   | 2011               |       |   | 2010 |   |
| Net loss attributable to common shareholders              |   | $                  | (2,096,471 | ) |   | $ | (1,722,808 | ) |
| Adjustments:                                              |   |               |       |   |   |   |   |   |
| Interest expense, net                                     |   |               | 177,541    |   |   |   | 25,543 |   |
| Income tax benefit                                        |   |               | (37,038    | )  |   |   | (37,038 | ) |
| Depreciation and amortization                             |   |               | 228,145    |   |   |   | 235,731 |   |
| EBITDA (loss)                                             |   |               | (1,727,823 | ) |   |   | (1,498,572 | ) |
| Allowance for doubtful accounts                           |   |               | 6,911      |   |   |   | 14,800 |   |
| Allowance for obsolete inventory                          |   |               | —    |   |   |   | (24,589 | )  |
| Stock-based compensation expense                          |   |               | 31,777     |   |   |   | 36,289 |   |
| Other income                                              |   |               | —    |   |   |   | (957 | ) |
| Loss from equity investment in non-consolidated affiliate |   |               | 17,457     |   |   |   | — |   |
| Foreign exchange (loss) gain                              |   |               | 122,076    |   |   |   | (57,515 | ) |
| Net change in fair value of warrant liability             |   |               | 24,874     |   |   |   | — |   |
| Net income attributable to noncontrolling interests       |   |               | 105,064    |   |   |   | 51,125 |   |
| Dividend to preferred shareholders                        |   |               | 329,460    |   |   |   | — |   |
| EBITDA, as adjusted                                       |   |               | (1,090,204 | ) |   |   | (1,479,419 | ) |

|     |   | Increase/(decrease)     |   |   | Percentage          |   |
|----------|--------|-------------------------|--------|--------|---------------------|--------|
|     |   | in case sales |   |   | increase/(decrease) |   |
|     |   | Overall                 |   |   | U.S.                |   |   | Overall |   |   | U.S. |   |
| Rum      |   |                    | 4,360  |   |                |   | 2,306 |   |   |   | 16.5 | % |   |   | 11.1 | % |
| Vodka    |   |                    | 3,255  |   |                |   | 3,263 |   |   |   | 21.8 | % |   |   | 30.0 | % |
| Liqueurs |   |                    | 2,158  |   |                |   | 2,333 |   |   |   | 19.4 | % |   |   | 21.7 | % |
| Whiskey  |   |                    | 118    |   |                |   | 1,022 |   |   |   | 2.2 | % |   |   | 40.6 | % |
| Tequila  |   |                    | 221    |   |                |   | 133 |   |   |   | 85.7 | % |   |   | 85.7 | % |
| Wine     |   |                    | 1,042  |   |                |   | 1,042 |   |   |   | 143.9 | % |   |   | 143.9 | % |
| Other    |   |                    | 155    |   |                |   | 155 |   |   |   | — |   |   |   | — |   |
|     |   |                    |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Total    |   |                    | 11,309 |   |                |   | 10,342 |   |   |   | 22.6 | % |   |   | 22.6 | % |

----

----

----

|   | • | continued significant levels of cash losses from operations; |
|--------|---------|--------------------------------------------------------------|

|   | • | our ability to obtain additional debt or equity financing should it be required; |
|--------|---------|----------------------------------------------------------------------------------|

|   | • | an increase in working capital requirements to finance higher levels of inventories and accounts receivable; |
|--------|---------|--------------------------------------------------------------------------------------------------------------|

|   | • | our ability to maintain and improve our relationships with our distributors and our routes to market; |
|--------|---------|-------------------------------------------------------------------------------------------------------|

|   | • | our ability to procure raw materials at a favorable price to support our level of sales; |
|--------|---------|------------------------------------------------------------------------------------------|

|   | • | potential acquisitions of additional brands; and |
|--------|---------|--------------------------------------------------|

|   | • | expansion into new markets and within existing markets in the United States and internationally. |
|--------|---------|--------------------------------------------------------------------------------------------------|

|                                                 |   | Three Months endedJune 30, |   |
|------------------------------------------------------|--------|----------------------------|--------|
|                                                 |   | 2011                       |   |   | 2010 |   |
|                                                 |   | (in thousands)        |   |
| Net cash provided by (used in):                      |   |                       |   |   |   |   |
| Operating activities                                 |   | $                          | (1,415 | ) |   | $ | (2,417 | ) |
| Investing activities                                 |   |                       | (63    | ) |   |   | 170 |   |
| Financing activities                                 |   |                       | 2,872  |   |   |   | 1,878 |   |
|                                                 |   |                       |   |   |   |   |   |   |
| Effect of foreign currency translation               |   |                       | 4      |   |   |   | (23 | ) |
|                                                 |   |                       |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents |   | $                          | 1,398  |   |   | $ | (392 | ) |

----

|   | • | our history of losses and expectation of further losses; |
|--------|---------|----------------------------------------------------------|

|   | • | the effect of poor operating results on our company; |
|--------|---------|------------------------------------------------------|

|   | • | the adequacy of our cash resources and our ability to raise additional capital; |
|--------|---------|---------------------------------------------------------------------------------|

|   | • | our ability to expand our operations in both new and existing markets and our ability to develop or acquire new brands; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------|

|   | • | our relationships with and our dependency on our distributors; |
|--------|---------|----------------------------------------------------------------|

|   | • | the impact of supply shortages and alcohol and packaging costs in general, as well as our dependency on a limited number of suppliers and inventory requirements; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | the success of our sales and marketing activities; |
|--------|---------|----------------------------------------------------|

|   | • | economic and political conditions generally, including the current recessionary economic environment and concurrent market instability; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | • | the effect of competition in our industry; |
|--------|---------|--------------------------------------------|

|   | • | 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 and our strategic partners’ abilities to protect trademarks and other proprietary information; |
|--------|---------|----------------------------------------------------------------------------------------------------------|

|   | • | the impact of litigation; |
|--------|---------|---------------------------|

|   | • | the impact of currency exchange rate fluctuations and devaluations on our revenues, sales and overall financial results; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------|

|   | • | our executive officers, directors and principal shareholders own a substantial portion of our voting stock; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------|

|   | • | the impact of federal, state, local or foreign government regulations. |
|--------|---------|------------------------------------------------------------------------|

----

----

| Exhibit |   |                                                                                                                                                                                                                                                                               |
|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description                                                                                                                                                                                                                                                                        |
| 3.1     |   | Composite Articles of Incorporation of the Company (incorporated by reference to exhibit 4.1 to the Company's Post-Effective Amendment No.1 to Form S-8 (File No. 333-160380) filed with the SEC on March 10, 2010).                                                |
|    |   |                                                                                                                                                                                                                                                                               |
| 3.2     |   | Articles of Amendment to Articles of Incorporation Designating the Preferences, Rights and Limitations of 10% Series A Convertible Preferred Stock of the Company (incorporated by reference to exhibit 3.1 to our current report on Form 8-K filed with the SEC on June 9, 2011). |
|    |   |                                                                                                                                                                                                                                                                               |
| 4.1     |   | Form of Common Stock Purchase Warrant to be issued by the Company (incorporated by reference to exhibit 4.1 to our current report on Form 8-K filed with the SEC on June 9, 2011).                                                                                                 |
|    |   |                                                                                                                                                                                                                                                                               |
| 4.2     |   | Form of Temporary Note to be issued by the Company (incorporated by reference to exhibit 4.2 to our current report on Form 8-K filed with the SEC on June 9, 2011).                                                                                                                |
|    |   |                                                                                                                                                                                                                                                                               |
| 10.1    |   | Securities Purchase Agreement dated as of June 8, 2011, between the Company and each purchaser identified on the signature pages thereto (incorporated by reference to exhibit 10.1 to our current report on Form 8-K filed with the SEC on June 9, 2011).                         |
|    |   |                                                                                                                                                                                                                                                                               |
| 10.2    |   | Securities Purchase Agreement dated as of June 8, 2011, between the Company and each purchaser identified on the signature pages thereto (incorporated by reference to exhibit 10.2 to our current report on Form 8-K filed with the SEC on June 9, 2011).                         |
|    |   |                                                                                                                                                                                                                                                                               |
| 10.3    |   | Securities Purchase Agreement dated as of June 8, 2011, between the Company and each affiliate purchaser identified on the signature pages thereto (incorporated by reference to exhibit 10.3 to our current report on Form 8-K filed with the SEC on June 9, 2011).               |
|    |   |                                                                                                                                                                                                                                                                               |
| 10.4    |   | Exchange Agreement dated as of June 8, 2011, between the Company and each purchaser identified on the signature pages thereto (incorporated by reference to exhibit 10.4 to our current report on Form 8-K filed with the SEC on June 9, 2011).                                    |
|    |   |                                                                                                                                                                                                                                                                               |
| 10.5    |   | Registration Rights Agreement dated as of June 8, 2011, between the Company and each purchaser identified on the signature pages thereto (incorporated by reference to exhibit 10.5 to our current report on Form 8-K filed with the SEC on June 9, 2011).                         |
|    |   |                                                                                                                                                                                                                                                                               |
| 10.6    |   | First Amendment to Exchange Agreement, dated as of June 13, 2011, between the Company and Frost Gamma Investments Trust (incorporated by reference to exhibit 10.1 to our current report on Form 8-K filed with the SEC on June 14, 2011).                                         |
|    |   |                                                                                                                                                                                                                                                                               |
| 31.1    |   | Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                               |
| 31.2    |   | Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                               |
| 32.1    |   | Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                   |

| * | Filed herewith |
|---|----------------|

----

|   | CASTLE BRANDS INC. |
|--------|--------------------|
|   |               |
|   | By:                | /s/ Alfred J. Small |
|   |               | Alfred J. Small  |
|   |               | Chief Financial Officer(Principal Financial Officer andPrincipal Accounting Officer)  |

----