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EX-31.1 - EXHIBIT 31.1 - Castle Brands Incv315702_ex31-1.htm
v2.4.0.6
NOTES PAYABLE AND CAPITAL LEASE
12 Months Ended
Mar. 31, 2012
Debt Disclosure [Abstract]  
Long-term Debt [Text Block]

 NOTE 9 — NOTES PAYABLE AND CAPITAL LEASE

 

    March 31,  
    2012     2011  
Notes payable consist of the following:                
Note payable (A)   $ 0     $ 426,175  
Note payable (B)     211,580       211,580  
Credit agreement (C)     0       2,500,000  
Note payable (D)     0       2,170,575  
Note payable (E)     0       1,028,329  
Note payable (F)     0       0  
Credit agreement (G)     3,849,831       0  
                 
Total   $ 4,061,411     $ 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 was secured by the Betts & Scholl inventory acquired by the Company under a security agreement. This note provided for an initial payment of $250,000, paid at closing, and for eight equal quarterly payments of principal and interest, with the final payment initially due on September 21, 2011. Interest under this note accrued at an annual rate of 0.84%, compounded quarterly. In December 2010, the Company amended the terms of the note to provide that the quarterly payments of principal and interest due December 21, 2010 and March 21, 2011, each in the amount of approximately $107,000, would not be due and payable until the maturity date of such note and that such installment payments would bear interest, payable on such maturity date, at the rate of 11% per annum, compounded quarterly. In June 2011, $107,354 of principal and interest was paid on this note under the existing terms of the note. In August 2011, $220,731 of principal and accrued interest was paid on this note in connection with the closing of the revolving loan agreement with Keltic Financial Partners II, LP (the “Keltic Facility”), as described in Note 9G. In October 2011, the remaining $107,354 due on this note was converted into Series A Preferred Stock and 2011 Warrants (each as defined in Note 10) as part of the private placement transaction described in Note 10, following shareholder and NYSE MKT approval of such transaction.

 

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 March 31, 2012 and 2011, $10,579 of accrued interest was converted to amounts due to affiliates. At March 31, 2012 and 2011, $211,580 of principal 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 greater than 10% shareholder of the Company, Lafferty Ltd., a greater than 5% shareholder of the Company, IVC Investors, LLLP, an entity affiliated with Glenn Halpryn, a director of the Company, Mark E. Andrews, III, a director of the Company and the Company’s Chairman, and Richard J. Lampen, a director of the Company and the Company’s President and Chief Executive Officer. Borrowings under the credit agreement were to mature on April 1, 2013 and bore interest at a rate of 11% per annum, payable quarterly. In August 2011, $2,030,137, consisting of $2,000,000 of principal and $30,137 of accrued but unpaid interest thereon was paid on this note in connection with the closing of the Keltic Facility as described in Note 9G. In October 2011, the remaining $500,000 outstanding under this facility, together with $2,110 in accrued but unpaid interest thereon, was converted into Series A Preferred Stock and 2011 Warrants as part of the private placement transaction described in Note 10, following shareholder and NYSE MKT approval of such transaction, and the revolving credit agreement was terminated.

 

D. In June 2010, the Company issued a $2,000,000 promissory note to Frost Gamma Investments Trust. Borrowings under the note were to mature on June 21, 2012 and bore interest at a rate of 11% per annum. In October 2011, $2,289,315, consisting of $2,000,000 of principal and $289,315 of accrued but unpaid interest thereon, was converted into Series A Preferred Stock and 2011 Warrants as part of the private placement transaction described in Note 10, following shareholder and NYSE MKT approval of such transaction.

 

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 were to mature on June 21, 2012 and bore interest at a rate of 11% per annum. In October 2011, $1,087,699, consisting of $1,000,000 of principal and $87,699 of accrued but unpaid interest thereon, was converted into Series A Preferred Stock and 2011 Warrants as part of the private placement transaction described in Note 10, following shareholder and NYSE MKT approval of such transaction.

 

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 10, subject to shareholder approval of such issuance in accordance with NYSE MKT 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 converted automatically into Series A Preferred Stock and 2011 Warrants in October 2011. These notes bore interest at 10% per annum and were to mature 18 months from the date of issuance. The affiliate purchasers include Frost Gamma Investments Trust, Mark E. Andrews, III, and certain of his affiliates, Richard J. Lampen, John S. Glover, the Company’s Chief Operating Officer, and Alfred J. Small, the Company’s Senior Vice President, Chief Financial Officer, Treasurer and Secretary. In October 2011, $1,005,000 was converted into Series A Preferred Stock and 2011 Warrants, and $34,618 of accrued interest was converted into accrued dividends on the Series A Preferred Stock, as part of the private placement transaction described in Note 10, following shareholder and NYSE MKT approval of such transaction. 

 

G. In August 2011, the Company and CB-USA entered into the Keltic Facility, a revolving loan agreement with Keltic Financial Partners II, LP ("Keltic"), providing for availability (subject to certain terms and conditions) of a facility of up to $5,000,000 for the purpose of providing the Company and CB-USA with working capital. In June 2012, as described in Note 18, the Keltic Facility was amended, among other changes, to increase availability to $7,000,000, subject to final documentation. The Company and CB-USA are referred to individually and collectively as the Borrower. The Keltic Facility expires on August 19, 2014. The Borrower may borrow up to the maximum amount of the Keltic Facility, provided that the Borrower has a sufficient borrowing base (as defined under the loan agreement). The Keltic Facility interest rate is the rate that, when annualized, is the greatest of (a) the Prime Rate plus 3.25%, (b) the LIBOR Rate plus 5.75%, and (c) 6.50%. Interest is payable monthly in arrears, on the first day of every month on the average daily unpaid principal amount of the Keltic Facility. After the occurrence and during the continuance of any "Default" or "Event of Default" (as defined under the loan agreement), the Borrower is required to pay interest at a rate that is 3.25% per annum above the then applicable Keltic Facility interest rate. In addition to a $100,000 commitment fee, Keltic also receives an annual facility fee and a collateral management fee. The loan agreement contains standard borrower representations and warranties for asset based borrowing and a number of reporting obligations and affirmative and negative covenants. The loan agreement includes negative covenants that, among other things, restrict the Borrower’s ability to create additional indebtedness, dispose of properties, incur liens, and make distributions or cash dividends. At March 31, 2012, the Company was in compliance, in all material respects, with the covenants under the Keltic Facility.  At March 31, 2012, $3,849,831 due on the Keltic Facility is included in long-term liabilities. See Note 18.

  

Payments due on notes payable are as follows:

 

Years ending March 31,   Amount  
2013   $ 0  
2014     0  
2015     3,849,831  
Thereafter     211,580  
         
Total   $ 4,061,411