Castle Brands Inc. (AMEX: ROX), the maker of premium branded spirits,
today announced that it is in advanced discussions with investors led by
Dr. Phillip Frost to receive a cash infusion of between $12.5 million
and $15.1 million. Under the proposed terms, Castle Brands will issue
and sell between 1 million and 1.21 million shares of newly created
Series A Convertible Preferred Stock for a price per share of $12.50.
Each share of Series A Convertible Preferred Stock will be convertible
into 35.7143 shares of the Company’s common
stock. Castle Brands expects that it will execute a definitive agreement
with the investors in the next few days.
If a definitive agreement is reached, it is currently anticipated that
substantially all holders of Castle Brands (USA) Corp.’s
(a wholly owned subsidiary of Castle Brands) 9% senior secured notes, in
the principal amount of $10 million plus accrued interest, and all
holders of Castle Brands’ convertible notes,
in the principal amount of $9 million plus accrued interest, will
convert their notes into shares of Series A Convertible Preferred Stock
at a price per share of $12.50 and $23.21, respectively.
As a result of the proposed transaction, including conversion of the
notes, a total of between approximately 78 million and 85.6 million
shares of the Company’s common stock could be
issued upon conversion of the Series A Convertible Preferred Stock.
Following the consummation of the proposed transaction, the holders of
the Series A Convertible Preferred Stock would own approximately 84% of
Castle Brands on an as-converted basis.
The proposed transaction is a result of a four month period of detailed
analysis of the Company’s opportunities and
avenues to stability. During this period, the Company engaged Miller
Buckfire & Co., LLC, a nationally recognized investment banking firm, as
its exclusive financial advisor in connection with prospective financing
and strategic transactions.
Although in the last 12 months the Company has made significant
reductions in its cash-burn, the Company’s
cash position has remained strained. With this prospective infusion of
between $12.5 million and $15.1 million in equity and the conversion of
approximately $19 million of debt and accrued interest to equity, the
Company believes it will stabilize and be in a position to grow its
current brands, pursue new agencies and acquire additional brands. Mr.
