SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

CRUZAN INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (561) 655-8977

Securities Registered Pursuant to Section 12(b) of the Act: Common Stock, $.01 Par Value

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    o Yes    ý  No

Indicated by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    o Yes    ý  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ý Yes    o  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of Title 17, Code of Federal Regulations) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    o Yes ý  No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    o Yes    ý  No

Aggregate market value of the voting stock held by non-affiliates of the registrant as of December 2, 2005 (computed by reference to the last reported sale price of the registrant’s Common Stock on the American Stock Exchange on such date):  $67,629,619.

The number of shares outstanding of the registrant’s Common Stock, $.01 par value per share, as of December 2, 2005, was 6,748,992.

There were no shares of Preferred Stock outstanding as of December 2, 2005.

Documents Incorporated by Reference: None.

Introductory Note

This Annual Report on Form 10-K for the fiscal year ended September 30, 2005 (the “Form 10-K”) contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or the future financial performance of the Company.  Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends” or “expects.”  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such risks, uncertainties, and other factors that may cause such a difference include, without limitation, those noted under “Risks That May Affect Future Results” beginning on page 10.  The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

Item 1.  Business

General Overview

Cruzan International, Inc. (the “Company”) is a producer and supplier of rum, brandy, wine and spirits to other beverage alcohol manufacturers; produces, imports and markets premium branded spirits; bottles beverage alcohol and other beverages on a contract basis and under private labels; and produces vinegar and cooking wine.  The Company operates four production facilities in the United States and one in St. Croix, United States Virgin Islands, and purchases certain products for resale.  The Company is a Delaware corporation organized in 1970 as a successor to a business founded in the Bahamas in 1964.

Market share and industry data and rankings disclosed in this report have been obtained from industry and government publications, as indicated; the Company has not independently verified this information, although management believes such data and rankings to be reasonably accurate.  All references in this report to “Fiscal 2005,” “Fiscal 2004” and “Fiscal 2003” refer to the Company’s fiscal years ended September 30 of such year.

Dominant Supplier of Bulk Alcohol Products

Management believes that the Company is the largest supplier of bulk rum in the United States based on reports of U.S. Imports for Consumption prepared by the Department of Census and that the Company’s market share of bulk rum products in the United States is more than 90%.  Management believes that the Company is the largest supplier of fortified citrus wine in the United States and is only aware of one other domestic supplier of fortified citrus wine.  Management is aware of only one other United States manufacturer of citrus brandy and citrus spirits and believes that the Company’s market share for these products is approximately 80% and 60%, respectively.

2005 Developments

Name Change

On May 2, 2005, the Company announced that it had changed its name from Todhunter International, Inc. to Cruzan International, Inc.  The new name, approved by the Company’s shareholders on March 15, 2005, reflects the Company’s evolving strategic focus on its Cruzan Rum brand, which has continued to experience tremendous growth since its repositioning in the marketplace in the late 1990s.  In conjunction with its new corporate identity, on May 3, 2005, the Company’s common stock began trading on the American Stock Exchange under its new symbol, “RUM.”

Change of Control and Merger Agreement

On June 3, 2005, the Company announced that Angostura, Ltd. (“Angostura”), the Company’s then controlling stockholder, had entered into a Stock Purchase Agreement with V&S Vin & Sprit AB, a Swedish-based

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international wine and spirits company (“V&S”), pursuant to which V&S agreed to purchase Angostura’s controlling interest in the Company.  Upon the terms and subject to the conditions set forth in the Stock Purchase Agreement, V&S agreed to purchase all 4,294,583 shares of the Company’s common stock beneficially owned by Angostura, representing approximately 63.6% of the Company’s outstanding common stock, for an aggregate consideration of $121,837,320, or $28.37 per share.  V&S subsequently assigned its rights in the Stock Purchase Agreement to The Absolut Spirits Company, Inc., a Delaware corporation (“ASCI”), its wholly-owned subsidiary.  The purchase and sale closed on September 26, 2005.

On July 8, 2005, the Company announced that ASCI had submitted a proposed Agreement and Plan of Merger pursuant to which a wholly-owned subsidiary of ASCI would merge with and into the Company, and each issued share of Company common stock not then owned by Angostura would be converted into the right to receive $28.37 in cash (the “ASCI Proposal”).

On September 30, 2005, the Company, ASCI, and Cruzan Acquisition, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of ASCI (“Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”).  The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation.

On December 1, 2005, the Company filed a preliminary proxy statement and other relevant documents concerning the ASCI Proposal with the Securities and Exchange Commission (the “Commission”) and intends to call a Special Meeting of its stockholders to vote on the Merger.

Other Developments

During Fiscal 2005, the Company continued its strategy of growing its premium branded spirits segment and capitalizing on its position in the flavored rum category by expanding its sales force and increasing its marketing budget, partly in response to increased competition from the Company’s major rum spirits competitors, primarily Bacardi, Diageo, Remy Cointreau and Pernod Ricard.  Fiscal 2005 was the second year that the Company sponsored celebrity entertainer Kenny Chesney to increase the brand awareness of Cruzan Rum.  Kenny Chesney was the Country Music Awards and American Music Awards “Entertainer of the Year” and Academy of Country Music top male vocalist of the year in 2004.  The Company has a sponsorship contract with Kenny Chesney for an additional two years.  Management believes that the Company’s brand promotion strategies have been effective in increasing the sales growth of the Cruzan Rum brand by 21% during Fiscal 2005.

In June 2005, the Company received $5.5 million, net of expenses, from a fully subscribed rights offering and as a result issued 408,787 shares of common stock.

In order to reduce losses in the Company’s bottling operations, in December 2004, management decided to discontinue production of all products in the Lake Alfred bottling plant with the exception of one bottling line that bottles vinegar, cooking wine and juices.  In January 2005, the operation of this bottling line was reduced to one shift.  At the present time, the Company has not taken an impairment charge relating to its bottling operations as the carrying value of its bottling assets is less than fair value.

On December 14, 2005, the Company entered into a loan arrangement with V&S consisting of a $30 million term promissory note and a $10 million revolving promissory note, both of which are unsecured, bear interest at the applicable LIBOR rate plus 90 basis points and mature on December 15, 2006.  The notes are non-amortizing and have no financial covenant requirements.  On December 16, 2005, the Company used the proceeds of these notes to refinance its existing credit agreement.

In Fiscal 2005, the Company had a loss before income tax benefit of $14.5 million compared to a loss before income tax benefit of $4.6 million in Fiscal 2004.  After income taxes, the Company’s net loss was $10.7 million in Fiscal 2005 compared to a net loss of $0.9 million in Fiscal 2004.  This loss was primarily due to (1) the increased marketing expenditures in our premium branded spirits segment, (2) continuing losses in the Company’s bottling operations and (3) the recording, as an expense, of the obligation of Angostura, the former majority owner of the Company, to make a payment of $9,000,000 to certain members of management of the Company.  Pursuant to a letter agreement entered into between Angostura and certain of the Company’s management on June 2, 2005, Angostura agreed to pay to certain of the Company’s management an aggregate amount of $9 million if the sale of

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Angostura’s controlling interest in the Company to ASCI were completed.  Although this sale was completed on September 26, 2005, as of December 16, 2005, this payment has not been made.  This payment is not the obligation of the Company and was negotiated between certain members of management and the former majority owner without the participation of or ratification by the Company’s board of directors or any committee thereof and does not affect the Company’s balance sheet or cash flow statement.  However, under Staff Accounting Bulletin 107 issued by the Commission relating to accounting for expenses or liabilities paid by principal stockholder(s), this expected payment by Angostura was treated as an expense of the Company in the statement of operations, and as a contribution to additional paid-in capital on the balance sheet.

Business Segments

The Company operates primarily in the beverage alcohol industry in the United States.  The Company reports its results in four operating segments:

•                  Bulk Alcohol Products (rum, citrus brandy, citrus spirits, cane spirits, fortified citrus wine, purchased distilled products and byproducts)

•                  Premium Branded Spirits (primarily Cruzan Estate Rums and Cruzan Flavored Rums)

•                  Bottling Operations (contract bottling services and private label products)

•                  Vinegar and Cooking Wine (bulk vinegar, bulk cooking wine, vinegar stock and private label case goods)

Information regarding the net sales, operating income (loss) and total assets of each of the Company’s business segments and information regarding geographic areas is set forth in Note 13 to the Company’s consolidated financial statements.

Bulk Alcohol Products.  The Company produces and sells rum, citrus brandy, citrus spirits, cane spirits and fortified citrus wine in the United States and internationally.  The Company also purchases distilled products for resale, including grain alcohol, which is denatured and packaged and sold as industrial alcohol to hospitals, universities, fragrance producers and other manufacturers.  The Company is the largest supplier of bulk rum in the United States, and it also supplies citrus brandy and fortified citrus wine.  The Company sells its bulk alcohol products to over 40 producers of beverage alcohol in the United States and exports bulk alcohol products to approximately 20 foreign countries. The Company’s distilling operations produce a byproduct, which is sold as animal feed.

Citrus brandy and spirits are distilled from citrus juice byproducts purchased from manufacturers of citrus juice concentrate. The Company’s citrus brandy is used primarily as an ingredient in flavored brandies. Citrus spirits are used primarily as a fortifying ingredient to increase the alcohol content of the Company’s citrus wine and the wine of other manufacturers. The Company’s citrus wine is fermented from citrus juice and fortified with citrus spirits to increase its alcohol content to approximately 20% by volume. Known as fortified citrus wine, this product is used primarily as an ingredient in cordials, whiskies and other beverage alcohol. Rum and cane spirits are distilled from sugar cane molasses and are sold to other bottlers of rum, producers of beverage alcohol, food companies and flavor manufacturers.  Rum is also used in the Company’s premium branded spirits and bottling operations.

Management believes that the Company’s proximity to raw materials and its use of citrus byproducts in the production of bulk alcohol provide it with cost advantages over competitors’ products. Because end products are taxed on a blended rate based upon the ingredients used rather than on the resulting alcohol content of the end product, beverage alcohol producers can lower excise taxes on their products by substituting fortified citrus wine for distilled spirits alternatives. This cost savings arises because fortified citrus wine is currently subject to federal excise taxes of $1.57 per gallon, whereas distilled spirits are taxed at $13.50 per proof gallon (one proof gallon is approximately equivalent in alcohol content to two and one-half gallons of fortified citrus wine). The ability of beverage alcohol producers to substitute fortified citrus wine for distilled spirits varies by end product in accordance with government regulations. For example, fortified citrus wine may contribute up to 49% of the alcohol content of cordials and liqueurs, and up to approximately 10% of the alcohol content of Canadian whiskey. In addition, small quantities of fortified citrus wine may be used in blended whiskey, rum, brandy and other types of beverage alcohol.

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The Florida citrus harvest generally occurs during the months from November through June.  The majority of the Florida citrus harvest is processed as fresh fruit juice or juice concentrate.  A byproduct of citrus juice production is citrus molasses, which the Company uses as a raw material in its distilling operations to produce citrus brandy and spirits.  Due to the seasonal availability and short “shelf-life” of the citrus molasses raw material, the Company produces its estimated annual customer requirements during a seven-month period, and therefore carries a higher than normal level of inventory in relation to sales during this seven-month period.  Generally, the Company’s inventory levels increase during this seven-month period, and when the citrus harvest ends the Company supplies its customers with citrus brandy and spirits from inventory from July through October.

Premium Branded Spirits.  The Company manufactures, imports, exports, and markets a variety of premium branded spirits.  The Company’s premium branded spirits include Cruzan Estate Rums, Cruzan Flavored Rums, Hine Cognac, Conch Republic Rum, Ron Carlos Rum and Antioqueno Aguardiente. The Company’s primary spirits brand is Cruzan Rum, which is the fourth-largest premium rum brand in the United States according to statistics published by Impact Databank and Adams Liquor Handbook, two leading spirits industry publications.

The Company’s strategy is to market high quality products that satisfy the preferences of consumers of legal drinking age and to support those products with international, national, and regional marketing programs.  These programs are intended to extend consumer brand recognition and brand loyalty.

In the United States, the Company sells branded spirits either through wholesale distributors or directly to state governments in those states that control alcohol sales.  Typically, the Company does not have contracts with its distributors although some states have statutes that limit the Company’s ability to terminate distributor relationships.  Outside the United States, the Company typically distributes its products by selecting the best local distributor for its brands in each specific market. The Company’s principal export markets for Cruzan Rum are Canada, Central America, the Caribbean, Scandinavia, the Baltic States, Italy, France, the Philippines, Israel, New Zealand and the Global Duty Free Markets (40 countries).  The Company has a distribution agreement with V&S that provides for joint marketing and for the distribution by V&S of Cruzan products in the international spirits market where the Company has not already established a distributor relationship.

The principal raw materials used in manufacturing and packaging Cruzan Rum are cane molasses, glass bottles, cartons, and oak barrels, which are used for storage and aging. Currently, none of these raw materials is in short supply, and there are adequate sources from which they may be obtained.  See discussion under “Raw Materials” for additional disclosures related to sourcing cane molasses and glass bottles.

The alcohol industry is highly competitive and there are many brands sold in the consumer market. Trade information indicates that the Company is one of the smaller branded spirit suppliers in the United States in terms of revenues, although Cruzan Rum has been recognized as one of the fastest growing brands in the United States by Impact Databank and Adams Liquor Handbook, two leading industry publications.

The Alcohol and Tobacco Tax and Trade Bureau of the United States Treasury Department regulates the wine and spirits industry with respect to production, blending, bottling, sales, advertising and transportation of alcohol products.  Also, each state regulates advertising, promotion, transportation, sale, and distribution of such products.

There are no federal regulations that require minimum aging to be designated rum. However, due to the Company’s high quality standards, the Company ages its Cruzan Estate Rums for two to five years and certain of the Company’s super premium rums are aged up to 12 years. Due to the Company’s own aging requirements, production of Cruzan Estate Rums is scheduled to meet demand two to three years in the future.  Accordingly, inventories are larger in relation to sales and total assets than for other branded spirits suppliers that do not age their products.  Management expects to continue to increase the Company’s inventory of barrel aged rums to meet increased sales in the future.

Bottling Operations.  The Company’s bottling operations include contract bottling services and the production, bottling and marketing of distilled spirits under its own private labels and under the private labels of retailers.  The Company’s primary bottling operations are located in Florida and primarily serve customers in the Southeastern United States.  The Company also produces and sells proprietary label products in the United States Virgin Islands.

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Contract bottling products include distilled spirits, coolers, prepared cocktails and fruit juices.  The Company had two large contract bottling customers which accounted for 76% of the bottling operations case volume and 38% of bottling operations net sales for the year ended September 30, 2005.  One of these contracts is for two years, expiring December 2007, and the other contract was on a year-to-year basis and has expired.  Also, in July 2005, the Company entered into a bottling contract with a new contract bottling customer.  The contract is for five years, expiring July 2010, but can be terminated within 180 days during the first year and within 90 days during each year thereafter.  The Company expects to produce approximately 750,000 cases per year under this contract.  Each of the Company’s existing contracts provides for advance notification of quarterly production requirements, although there are no minimum volume requirements.

Private label products include rum, gin, vodka, tequila, cordials and various whiskies.  The Company’s private label products are marketed in the popular-price category of the distilled spirits market.  The Company has one large private label customer which accounted for approximately 6% of bottling operations case volume and 17% of bottling operations net sales for the year ended September 30, 2005.  Net sales from this customer are based on short-term arrangements that may terminate at any time. Although the Company does not have long-term contracts with its private label customers, management believes that its relations with its customers are good.

The Company sells its private label products to distributors located primarily in the Southeastern United States.  The Company does not have contracts with distributors for its private label products.

Vinegar and Cooking Wine.  To complement its distilling, winery and bottling operations, the Company produces vinegar, vinegar stock, and cooking wine.  The Company sells vinegar and cooking wine to over 700 condiment manufacturers, food service distributors and major retailers in the United States and Canada. The Company’s sales to retailers are made under the Company’s private labels and retailers’ private labels.

The Company has three large vinegar and cooking wine customers which accounted for 23% of the net sales of vinegar and cooking wine for the year ended September 30, 2005.   Although the Company does not have long-term supply contracts with its vinegar and cooking wine customers, management believes that its relations with its customers are good and that the Company’s products are competitively priced.

Corporate Operations.  The Company’s executive offices are located in West Palm Beach, Florida and certain of the expenses of the Company’s executive offices are not allocated to the operating segments described above.  These expenses include salaries and related expenses, legal and professional fees, rent for office space, utilities and insurance.

Dependence on Major Customers

No single customer was responsible for more than 10% of the Company’s consolidated net sales during Fiscal 2005.  The Company has five major customers in its bulk alcohol products segment, three major customers in its bottling operations segment, and three major customers in its vinegar and cooking wine segment; the loss of one or more of these major customers in any of these segments could have a material adverse effect on that segment.

Production

The Company’s principal domestic production facilities are located in Lake Alfred and Auburndale, Florida, both near Orlando and central to Florida’s citrus growing region. The two plants have similar distilling, bottling and winery operations, allowing the Company to shift production from one plant to the other. The Lake Alfred plant also has a vinegar production facility. Both plants are near major highways and are serviced by a railroad, providing good transportation access. The Company has a cold storage, warehousing and plastic bottle manufacturing facility in Winter Haven, Florida. The Company also operates a winery and vinegar production facility in Louisville, Kentucky. The Company’s rum production facilities are located in St. Croix, United States Virgin Islands.

Distilling.  The Company begins its distilling process with citrus or cane molasses, which is fermented for approximately two to four days. Once fermented, the product has an average alcohol content of 9% by volume, which is increased to approximately 95% through distillation. The alcohol is further purified through rectifying columns which remove impurities. The finished product is stored in stainless steel tanks, except for rum, which is

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generally stored in wooden barrels for aging purposes. The Lake Alfred, Auburndale and Virgin Islands facilities can produce, on a combined basis, up to 23 million proof gallons of distilled products per year.

Winery.  Wine is produced by the fermentation of citrus or grape juice. After fermentation, the wine is fortified by the addition of distilled citrus spirits to raise its alcohol content to approximately 20% by volume. Fortified citrus wine is sold to producers of beverage alcohol. The wineries are physically segregated from the distilling operations and have their own sets of fermenting and storage tanks. The Lake Alfred, Auburndale and Louisville facilities can produce, on a combined basis, up to 30 million gallons of wine per year.

Bottling.  The Lake Alfred plant has one line that is used primarily to bottle vinegar, cooking wine and juices.  The Auburndale plant has two lines that are dedicated to bottling coolers and prepared cocktails and three lines that bottle private label products and premium branded spirits. The Company’s warehouse storage areas can accommodate up to 1,000,000 cases. The Company’s plant in the Virgin Islands has one line capable of bottling up to 250,000 cases per year.  The Company distills and ages its own rum, but generally produces its other private label products from alcohol purchased from third parties. Depending on the particular formula for a product, the Company adds flavoring and/or sugar, reduces the product’s proof and then filters and bottles the finished product.  The Company’s bottling capacity is approximately 6 million cases per year.

Vinegar and Cooking Wine.  Vinegar is produced by converting alcohol into acetic acid. Several varieties of vinegar, including white distilled, red wine, white wine, corn, rice wine, malt, balsamic and apple cider, are produced at the Lake Alfred and Louisville facilities, which have a combined capacity of 10 million grain gallons per year. Cooking wine is produced by the controlled fermentation of red or white grape juice into wine and is then denatured with salt or other ingredients.  Because of this denaturing process, these products are not subject to federal excise taxes.  Several varieties of cooking wine, including red, white, sherry, golden, marsala and chablis, are produced at the Lake Alfred, Auburndale and Louisville facilities.

Quality Control.  Each of the Company’s facilities is equipped with a quality control laboratory. The Company employs several chemists who continually test to ensure the quality of raw materials and end products.

Raw Materials.  The cost of raw materials fluctuates depending upon a number of factors, including crop conditions, weather, governmental programs and purchases by foreign governments.

The principal raw materials used in the Company’s distilling operations are citrus molasses, a byproduct of citrus juice production, and cane molasses, a byproduct of sugar production. Citrus molasses, which is used in the production of citrus brandy and citrus spirits, accounted for approximately 55% of the raw materials used in the Company’s distilling operations in Fiscal 2005. Cane molasses, which is used in the production of rum and cane spirits, accounted for the remaining 45%. Citrus juice concentrate is the primary raw material used in the Company’s winery operations. The Company purchases such raw materials from a variety of suppliers. The Company purchases distilled products, used in its bulk alcohol products and bottling operations businesses, from several suppliers. Glass bottles and other materials, such as caps, labels and cardboard cartons, are used in bottling and packaging and, with the exception of glass bottles, are available from numerous suppliers.  Alcohol and grape juice concentrate are the primary raw materials used in the Company’s vinegar and cooking wine operations.  As more fully described below, during Fiscal 2005, two suppliers each accounted for more than 10% of all of the Company’s raw material purchases.

The Company purchases the majority of its glass bottle requirements from Saxco International, Inc. Glass bottle costs are one of the largest components of the Company’s cost of goods sold.  The glass bottle industry is highly concentrated with only a small number of producers.  The Company has decided to utilize one supplier for cost-based reasons.  The inability of the Company’s glass bottle supplier to satisfy the Company’s requirements could adversely affect the Company’s operations, although the Company could shift its business to one or more other suppliers.

The Company uses cane molasses as a raw material for the production of rum at its facilities in St. Croix, United States Virgin Islands.  The Company purchases its cane molasses raw material requirements through Westway Trading Corporation, a broker that specializes in the South American and Caribbean molasses markets.  This arrangement is beneficial to the Company in securing a higher quality molasses at lower prices than the Company could obtain by going directly to the individual molasses suppliers.  Based on an analysis of the world-wide cane molasses market provided to the Company by the Company’s molasses broker, management believes that

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there are adequate supplies of cane molasses available to meet the Company’s cane molasses raw material requirements, and the Company could, shift its business to one or more other suppliers.

Due to the effects of hurricanes on the Florida citrus crop in 2004 and 2005, the Company’s supply of citrus molasses was not sufficient to meet its citrus alcohol requirements in 2005 and may not be sufficient in 2006. However, during 2005, the Company was able to use alternative sources of raw material to meet its citrus alcohol requirements. This alternative source has increased the Company’s production costs by approximately $0.5 million for certain of its bulk citrus alcohol products.  There can be no assurance that the Company will be able to adequately source its citrus alcohol raw material requirements at reasonable prices during 2006.

Fluctuations In Operating Results; Seasonality

The size and timing of purchase orders and product shipments can cause operating results to fluctuate significantly from quarter to quarter, particularly since some customers purchase bulk alcohol products in significant quantities at one time or place significant orders at one time for contract bottling services, distilled spirits, vinegar and cooking wine.  Additionally, some Company products generate higher profit margins than others, and changes in the Company’s product mix will therefore cause gross margins to fluctuate.  Certain aspects of the Company’s business are also seasonal, with increased demand for the Company’s contract bottling services from April to October and increased production of the Company’s bulk alcohol products from November to June, corresponding to the Florida citrus harvest.  As a result of these factors, the Company’s operating results may vary significantly from quarter to quarter.

Marketing and Distribution

Bulk alcohol products are sold primarily in large quantities through Company-employed salespeople. The Company’s marketing strategy emphasizes the cost advantages of these products over other ingredients available to end producers. Bulk alcohol products are sold primarily to other bottlers, distillers and end producers located in the United States and are exported to approximately 20 foreign countries.

The Company manufactures, imports, exports and markets a variety of premium branded spirits to wholesalers in the United States and internationally.  The Company’s marketing and promotional programs for its premium brands are directed at consumers, retailers and wholesalers and include consumer and trade print advertising, event sponsorship, product sampling, in-store displays, price promotions, point-of-sale materials and public relations.

The Company sells private label products to wholesalers for distribution primarily in the Southeastern United States. The Company’s marketing strategy for these products places primary emphasis upon the Company’s cost advantages, directed at wholesalers and retailers, rather than consumers. Wholesalers market these products to retailers who then market them directly to consumers.  Although competition for retail shelf space in the beverage alcohol industry is significant, wholesalers of such products, and not the Company, generally must address such competition.  Sales of the Company’s premium branded spirits and private label products are generally made FOB (free on board) at the Company’s facilities and, accordingly, the purchasers of such products are responsible for the risk of loss and transportation costs. In addition to its own sales force, the Company works through various brokers to develop and service its sales to wholesalers and retailers.

The Company’s marketing strategy with respect to its contract bottling services emphasizes the cost advantages and quality of the Company’s services. Arrangements with bottling customers are typically negotiated by the Company’s executive officers.

Vinegar and cooking wine are sold primarily in large quantities to manufacturers, distributors and retailers through the Company’s own sales force. These products are also sold through wholesalers and directly to retailers under the Company’s private labels and the private labels of retailers.

Trademarks and Distribution Agreements

Trademarks are an important aspect of the Company’s business.  The Company sells its products under a number of trademarks, which the Company owns or uses under license.  The Company’s important trademarks include Cruzan Rum, Cruzan Estate Rum, Cruzan Flavored Rum, Ron Carlos Rum, Conch Republic Rum and

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Edmundo Cooking Wine.  Throughout its segments, the Company also has various licenses and distribution agreements for the sale, or the production and sale, of its products and products of third parties.  These licenses and distribution agreements have varying terms and durations.  Agreements include, among others, import, marketing and distribution agreements (“Imported Spirits Distribution Agreements”) with Antioqueno Aguardiente, expiring in May 2006, and Hine Cognac, which is a year-to-year renewable arrangement for services to be performed by the Company.  The Company also has distribution agreements with several third parties to distribute Cruzan Rum in foreign countries, including a distribution agreement with V&S to distribute Cruzan products in the international spirits market.

All of the Company’s Imported Spirits Distribution Agreements may be terminated if the Company fails to meet certain performance criteria.  The Company believes it is currently in compliance with all material terms of its Imported Spirits Distribution Agreements.  There can be no assurance that these agreements will continue beyond their scheduled expiration dates.

Competition

The markets in which the Company’s business segments operate are highly competitive with respect to price, service and product quality, and there are several companies with substantially greater financial and other resources than the Company.  The following is a summary of the Company’s main competitors, geographic area of operations and market share for the Company’s principal products.

The Company’s bulk rum products compete primarily with two Caribbean rum producers, West Indies Rum Distillery and Foursquare Distillery, both in Barbados.  The Company competes with these other bulk rum producers primarily in the United States, although the Company does sell small quantities of bulk rum internationally.  Management believes that the Company is the largest supplier of bulk rum in the United States based on reports of U.S. Imports for Consumption prepared by the Department of Census and that the Company’s market-share of bulk rum products in the United States is approximately 90%.

The Company’s citrus brandy and citrus spirits products are sold in the United States and management is aware of only one other domestic producer, Bartow Ethanol Company.  Management believes that the Company is the largest supplier of bulk citrus brandy and citrus spirits in the United States and that the Company’s market share of citrus brandy and citrus spirits in the United States is approximately 80% and 60%, respectively.

The Company’s cane spirits are sold in the United States.  Management is not aware of any other domestic producers of cane spirits and is not able to determine the Company’s market share for this product.

The Company’s fortified wine products are sold in the United States, and to a much lesser extent, in Northern Europe.   Although management is aware of only two other producers of citrus-based fortified wine, Meier’s Wine Cellars, Inc. and Alko, Inc. (Netherlands), there are several producers of grape-based fortified wine that compete with the Company’s fortified wine products.  Some producers of grape-based fortified wine include Golden State Vintners, Inc., Constellation Brands and Mogen David.  Management is not able to determine the number of competitors for the Company’s fortified wine products or the Company’s share of the fortified wine market.

The Company’s premium branded spirits products, primarily Cruzan Estate Rums and Cruzan Flavored Rums, are sold in the United States and 13 other countries internationally.  The Company’s premium branded spirits products compete against other distilled spirits products, including premium labels, mid-price and popular-price products.  The Company’s largest competitors in this segment are Bacardi, Inc. (Bacardi Rum), Diageo (Captain Morgan Rum), Pernod Ricard (Malibu Rum) and Remy Cointreau (Mount Gay Rum).  Each of these competitors has greater financial resources than the Company.  Based on data published in the Impact Databank and Adams Liquor Handbook, management estimates that the Company has less than a 1% share of the distilled spirits market in the United States and a 2% share of the United States rum market.  The Company’s premium branded spirits products compete with those of companies for whom the Company performs contract bottling services and to whom the Company sells its bulk alcohol products. The Company believes that its relationships with its customers are good, and it has not experienced any adverse effects, such as termination or non-renewal of ongoing contracts, as a result of competition. In addition, the Company does not expect to experience any material adverse effects from such competition in the foreseeable future.

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The Company’s private label products compete mainly in the Southeastern United States against other distilled spirits products, including premium labels, mid-price and popular-price products.   The Company’s main competitors for its private label products include Heaven Hill Distillers, Barton Brands, Ltd., LeVecke Corporation and McCormick Distilling.  Management is not able to determine the Company’s market share for these products.

The Company’s contract bottling operations compete against other bottlers located throughout the Southeastern United States. Management is not able to determine the number of other competitors or its market share for these services.

  The Company’s vinegar products are sold primarily in the Southeast and Midwest United States.  In the United States, the vinegar industry is dominated by two large manufacturers, Mizkan and Fleishman, with approximately 20 vinegar plants, and there are about ten smaller manufacturers, including National Vinegar and Creole Fermentation, with an aggregate of approximately 24 vinegar plants.  Management is not able to determine the Company’s market share of vinegar products.  Since vinegar is a low margin commodity, the sale of vinegar is limited to within a small radius of a particular manufacturing plant due to the cost of shipping to the customer.  Therefore, with the exception of certain higher margin specialty vinegars which are sold throughout the United States, the majority of the Company’s vinegar products are only competitive within a limited radius of the Company’s manufacturing facility, generally 200 to 500 miles.

The Company’s higher margin cooking wine products are sold throughout the United States and Canada.  The Company’s competitors for its cooking wine products include Canandaigua Wine Company, San Antonio Winery, Gibson Winery and Heck Cellars.  Although published data is not available, management is not aware of any competitors of the Company’s size and believes that the Company is the largest supplier of cooking wine in the United States.

Regulation and Taxation

The Alcohol and Tobacco Tax and Trade Bureau of the United States Treasury Department regulates the wine and spirits industry with respect to production, blending, bottling, sales, advertising and transportation of alcohol products.  Also, each state regulates advertising, promotion, transportation, sale and distribution of alcohol products.

Pursuant to federal and state environmental requirements, the Company is required to obtain permits and licenses to operate certain facilities, and to treat and remove effluents discharged from its distilling, winery and bottling operations. Management believes it is presently in material compliance with all applicable federal and state regulations.

Beverage alcohol produced and bottled by the Company is subject to federal excise taxes. As of September 30, 2005, excise taxes were being imposed at flat rates of $13.50 per proof gallon for distilled spirits and $1.57 per gallon for fortified wine.

The Company’s fortified wine products, as an ingredient of beverage alcohol, have a cost advantage under the component method of taxation, which taxes wine at a lower rate than distilled spirits. Changes in, or the elimination of, the component method of taxation, as it relates to wine, could have a material adverse effect on the Company’s results of operations.

Employees

As of September 30, 2005, the Company had approximately 390 full-time employees. Additional workers are generally employed at the Company’s bottling facilities during the summer months, when the bulk of contract bottling takes place. None of the Company’s employees is a member of any labor union, nor are there any collective bargaining agreements between the Company and its employees, with the exception of 36 of the Company’s 56 United States Virgin Islands employees.  Management believes that its relations with its employees are good.

Information about Foreign and Domestic Operations and Export Sales

The Company has facilities in Florida and Kentucky for the production of bulk alcohol products, premium branded spirits, contract bottling services, vinegar and cooking wine.  The Company sells its products and services

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primarily to customers in the United States but also exports certain products to foreign countries, primarily in Europe, Canada, Central America and the Caribbean.  The Company’s rum production facilities are located in St. Croix, United States Virgin Islands.  Bulk rum produced in the Virgin Islands is sold primarily to other bottlers of rum, producers of beverage alcohol, food companies and flavor manufacturers located in the United States, but is also sold to foreign countries in the Caribbean, South America and Europe.  See Note 13 to the Company’s consolidated financial statements for additional information about the Company’s foreign and domestic operations and export sales.

Item 1A.  Risk Factors

Risks That May Affect Future Results

In addition to the risks and uncertainties of ordinary business operations, important factors that could cause our actual results to differ materially from those contained in or implied by any forward-looking statements contained in this Annual Report on Form 10-K include:

We face competition that may reduce our market share and margins.

We are in a highly competitive industry and the dollar amount and unit volume of our sales could be negatively affected by:

•                  our inability to maintain or increase prices,

•                  changes in geographic or product mix,

•                  a general decline in beverage alcohol consumption, or

•                  the decision of wholesale customers, retailers or consumers to purchase competitors’ products instead of our products.

Since March 2003, no less than four of our largest competitors – Bacardi, Diageo, Allied Domecq and Pernod Ricard – have introduced competitive flavored rum product offerings.  Each of these competitors has greater financial resources than we do.  Wholesaler, retailer and consumer purchasing decisions are influenced by, among other things, the perceived absolute or relative overall value of our products, including their quality or pricing, compared to competitive products.  Unit volume and dollar sales could also be affected by pricing, purchasing, financing, operational, advertising or promotional decisions made by wholesalers, state and provincial agencies, and retailers, which could affect their supply of, or consumer demand for, our products.  We could also experience higher than expected selling, general and administrative expenses if our management finds it necessary to increase the number of personnel or advertising or promotional expenditures to maintain our competitive position or for other reasons.  Increased competition and unanticipated actions by competitors or customers could lead to downward pressure on prices and/or a decline in our market share, which would adversely affect our results and hinder our growth potential.

Our bottling operations have declined in recent fiscal years, and may continue to decline.

Net sales of our bottling operations were $13.0 million, $11.9 million and $14.3 million for Fiscal 2005, 2004 and 2003, respectively.  During the first quarter of Fiscal 2004, we lost a large private label-bottling customer that accounted for approximately 17.6% of our bottling operations net sales and 5.2% of our bottling operations volume.  Sales in our bottling operations have also declined as a result of a contraction in the ready-to-drink product category, for which we are a contract bottler.  Responding to this decline, in July 2004, we completed the partial consolidation of our bottling operations to reduce overhead.  However, bottling operations volume did not even meet management’s reduced expectations for Fiscal 2004, which caused a continuing loss in this segment.  We have been placing a renewed emphasis on the sales effort in this segment, seeking other contract bottling opportunities.  We have explored other alternatives in our two bottling facilities, including further consolidation, a partial sale and shedding less profitable product lines.  In December 2004, management discontinued production of all products in the Lake Alfred bottling plant with the exception of one production line bottling vinegar, cooking wine and juices.  In January 2005, we reduced the operation of this bottling line to one shift.  Management cannot assure that its efforts will be successful, or that this segment will experience operating profits in the future.

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Our premium branded spirits segment has experienced, and may continue to experience, operating losses as we reinvest our gross profit from that and other segments in our selling, general and administrative expense for the premium branded spirits segment.

Net sales of our premium branded spirits segment, which includes Cruzan Estate Rums and Cruzan Flavored Rums, for Fiscal 2005 increased by 22.6% compared to Fiscal 2004.  However, during Fiscal 2005, our premium branded spirits segment’s operating losses only improved to $7.3 million from operating losses of $7.6 million in Fiscal 2004.  These operating losses reflect management’s continuing efforts to increase market share by reinvesting this and other segments’ gross profits in selling and marketing expenses for the premium branded spirits segment in an effort to support the continued growth of our Cruzan brand.  Management intends to continue its increased expenditures in 2006 to maintain the growth of the Cruzan brand.  We cannot assure that our increased selling and marketing efforts will be successful, or that this segment will experience operating profits in the future.

The seasonality of our business and the timing of orders could cause operating results to fluctuate.

The size and timing of purchase orders and product shipments can cause our operating results to fluctuate significantly from quarter to quarter, particularly since some customers purchase bulk alcohol products in significant quantities at one time or place significant orders at one time for contract bottling services, vinegar and cooking wine.  Additionally, some of our products generate higher profit margins than others, and changes in our product mix will therefore cause gross margins to fluctuate.  Certain aspects of our business are also seasonal, with increased demand for our contract bottling services from April to October and increased production of some of our bulk alcohol products from November to June, corresponding to the Florida citrus-harvest.  As a result of these factors, our operating results may be erratic, varying significantly from quarter to quarter.

Our dependence on distribution channels may limit our ability to sell our products.

We sell our private label products and premium branded spirits principally to wholesalers for resale to retail outlets, including package liquor stores and restaurants.  The replacement or poor performance of our principal wholesalers or our inability to collect accounts receivable from our principal wholesalers could materially and adversely affect our results of operations and financial condition.  Distribution channels for alcoholic beverages have been characterized in recent years by rapid change, including consolidations of certain wholesalers.  Wholesalers and retailers of our products offer products which compete directly with our products for retail shelf space and consumer purchases.  Accordingly, there is a risk that these wholesalers or retailers may give higher priority to competitor products.  We cannot assure that our wholesalers and retailers will continue to purchase our products or provide our products with adequate levels of promotional support.

We must maintain a relatively large inventory of our products to support customer delivery requirements, and if this inventory becomes obsolete and we are required to write down our inventory, our operating results would be adversely affected.

We must maintain a relatively large inventory to meet customer delivery requirements for our products, including those in our bulk alcohol, premium branded spirits, bottling operations, and vinegar and cooking wine segments. Inventory may become obsolete as we and our customers introduce new products, cease to produce old products, or modify the design of a product’s packaging. We maintain a provision for inventory obsolescence to cover potential write-downs in inventory for obsolescence, but we cannot assure that this provision is adequate, and inventory obsolescence could harm our operating results.

An increase in excise taxes or government regulations could have a material adverse effect on our business.

In the United States and other countries in which we operate, we are subject to the imposition of excise and other taxes on beverage alcohol products in varying amounts which have been subject to change.  Significant increases in excise or other taxes on beverage alcohol products could materially and adversely affect our financial condition or results of operations.  Many states have considered proposals to increase, and some of these states have increased, state alcohol excise taxes.  In addition, federal, state, local and foreign governmental agencies extensively regulate the beverage alcohol industry concerning such matters as licensing, trade and pricing practices, permitted and required labeling, advertising and relations with wholesalers and retailers.  Certain federal and state regulations

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also require warning labels and signage.  New or revised regulations or increased licensing fees, requirements or taxes could also have a material adverse effect on our financial condition or results of operations.

A decline in the consumption of products we sell could adversely affect our sales revenues or margin.

There have been periods in the past in which there were substantial declines in the overall per capita consumption of beverage alcohol products in the United States and other markets in which we operate.  A limited or general decline in consumption in one or more of our product categories could occur in the future due to a variety of factors, including:

•                                          a decline in the popularity of flavored spirits;

•                                          demographic and social trends, changes in travel, vacation or leisure activity patterns and a downturn in economic conditions;

•                                          increased concern about the health consequences of consuming beverage alcohol products and about drinking and driving;

•                                          increased activity of anti-alcohol consumer groups;  and

•                                          increased federal, state or foreign excise or other taxes on beverage alcohol products.

Any decline in the consumption of products we sell could have a significant adverse effect on our sales revenue or margin.

A small number of customers account for a high percentage of our net sales and if we lose a few customers or are unable to attract new customers, our net sales could decline.

Our bulk alcohol, contract bottling services and private label products are sold to a relatively small number of customers and we have large customers for vinegar and cooking wine.  The loss of a few of these customers could have a material adverse effect on our liquidity and results of operations.  For example, our net sales for our bottling operations decreased 16.6% between Fiscal 2003 and Fiscal 2004, and 23.5% between Fiscal 2002 and Fiscal 2003 largely because of the loss of two large customers.  We cannot assure that we will not lose other customers.

We expect that sales of certain products to a small number of customers will continue to account for a high percentage of our net sales for the foreseeable future.  For example, for Fiscal 2005, 2004 and 2003, our top 10 customers accounted for approximately 28%, 43% and 58%, respectively, of our total net sales.  Our future success depends on our ability to retain our current customers, and to attract new customers.  The loss of one or several customers, whether through termination of agreements, acquisitions or bankruptcy, could significantly reduce our net sales.

Changes in the regulatory environment for the operation of our business or those of our customers could pose risks and increased expenses.

The Sarbanes-Oxley Act of 2002 and new rules subsequently implemented by the Commission have required changes in corporate governance practices of public companies.  In addition to final rules and rule proposals already made by the Commission, the American Stock Exchange has adopted revisions to its requirements for listed companies.  We continue to review all of our accounting policies and practices, legal disclosure and corporate governance policies under the new legislation, including those related to our relationships with our independent auditors, enhanced financial disclosures, internal controls, board and board committee practices, corporate responsibility and loan practices, and we intend fully to continue to comply with such laws.  Management expects these new rules and regulations to make it more difficult for us to attract and retain qualified executive officers and qualified members of our Board of Directors, particularly to serve on the various committees of the Board, including and in particular, the audit committee.  In addition, compliance with new rules imposed by the Commission and the American Stock Exchange will likely cause us to incur increased expenses, including legal and accounting expenses.

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If we do not successfully address the risks inherent in selling to international customers, our net sales and financial results could decline.

We derived 5% of our net sales from international sales in Fiscal 2005 and 8% in Fiscal 2004.  Management plans to expand net sales and to grow our international operations.  We have limited experience in international sales and may not be able to compete or operate effectively in international markets.  We face certain risks inherent in conducting business internationally, including:

•                                          fluctuations in currency exchange rates and imposition of currency exchange controls;

•                                          language and translation issues;

•                                          difficulties in collecting accounts receivable and longer collection periods;

•                                          changes in regulatory requirements;

•                                          political and economic instability; and

•                                          potential adverse tax consequences.

Any of these factors could harm our international sales and, consequently, our business and operating results.  Specifically, failure to successfully manage international growth could result in higher operating costs than anticipated or could delay or preclude altogether our ability to generate net sales in key international markets.

We have a material amount of goodwill and adverse results in operations could result in a write-down of goodwill, which would further adversely affect our results of operations.

As of September 30, 2005, goodwill represented approximately $20.5 million, or 15% of our total assets.  Goodwill is the amount by which the costs of an acquisition accounted for using the purchase method exceeds the fair value of the net assets acquired.  We adopted Statement of Financial Accounting Standard No. 142 (“SFAS No. 142”), “Goodwill and Other Intangible Assets,” in its entirety, on October 1, 2001.  Under SFAS No. 142, goodwill is no longer amortized, but instead is subject to a periodic impairment evaluation based on the fair value of the reporting unit.  Reductions in our net income caused by a write-down of goodwill could materially and adversely affect our results of operations.

Adverse public opinion about alcohol may harm our business.

In recent years there has been substantial publicity regarding the possible health benefits of moderate alcohol consumption.  The results of a number of studies suggest that moderate consumption of beverage alcohol could result in decreased mortality, lower risk of cardiovascular disease, and other health benefits.  Alternatively, anti-alcohol groups have, in the past, successfully advocated more stringent labeling requirements and other regulations designed to discourage consumption of beverage alcohol.  More restrictive regulations, negative publicity regarding alcohol consumption, publication of studies that indicate a significant health risk from moderate consumption of alcohol or changes in consumer perceptions of the relative healthfulness or safety of beverage alcohol generally could adversely affect the sale and consumption of alcohol and the demand for beverage alcohol and could have a material adverse effect on our business, financial condition, and results of operations.

Item 1B.  Unresolved Staff Comments

Not applicable.

Item 2.  Properties

The Company owns all of its principal production facilities, including all related land, buildings, and equipment. The Lake Alfred facility consists of four principal buildings with approximately 250,000 total square feet on 32 acres. The Auburndale facility consists of three principal buildings with approximately 250,000 total square feet on 16 acres. The Louisville facility consists of three principal buildings with approximately 60,000 total square feet on 27.5 acres. The Winter Haven facility consists of five principal buildings with approximately 260,000 total square feet on 27.5 acres. The Virgin Islands facility consists of 11 principal buildings with approximately 140,000 total square feet on 33 acres.  The Company leases approximately 10,000 square feet of office space in

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West Palm Beach, Florida for its executive offices and 2,600 square feet of office space in Jupiter, Florida for its marketing operations.  Management believes that all of its facilities, both owned and leased, are adequate and suitable for operations in the foreseeable future.  However, management may undertake the expansion of certain facilities from time to time in the ordinary course of business.

Item 3.  Legal Proceedings

The Company and its subsidiaries are subject to litigation from time to time in the ordinary course of business.  None of these routine legal proceedings are material.

Item 4.  Submission of Matters to a Vote of Security Holders

No matters were submitted to security holders during the fourth quarter of Fiscal 2005.

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PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s Common Stock trades on the American Stock Exchange under the symbol “RUM.”  Table 1 below sets forth the high and low closing quotations of the Company’s Common Stock for each quarter during the two most recent fiscal years.

Table 1 – High and Low Quotations of the Company’s Common Stock

The number of stockholders of record as of December 2, 2005 was 22.  In addition, based upon a list of non-objecting beneficial owners, there were at least 435 beneficial owners.

No dividends were paid to stockholders during Fiscal 2004 and Fiscal 2005. The Company intends to continue to retain earnings for use in its business and, therefore, does not anticipate declaring or paying cash dividends in the foreseeable future.

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Item 6.  Selected Financial Data

The selected financial data in Table 2 below are derived from the Company’s audited consolidated financial statements. These data are qualified by reference to, and should be read in conjunction with, the consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.

Table 2 – Selected Financial Data

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Management’s discussion and analysis of financial condition and results of operations contains “forward-looking statements.”  See “Introductory Note” on page 1.

The following discussion and analysis summarizes the significant factors affecting (i) consolidated results of operations of the Company for Fiscal 2005 compared to Fiscal 2004, and Fiscal 2004 compared to Fiscal 2003, and (ii) financial liquidity and capital resources for Fiscal 2005.  This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and notes thereto included herein.  Certain amounts presented in this Item 7 have been rounded to the nearest thousand and hundred thousand, as applicable, but the percentages are based on actual amounts without rounding.

The Company operates primarily in the beverage alcohol industry in the United States.  The Company reports its operating results in four segments:  Bulk Alcohol Products (rum, citrus brandy, citrus spirits, cane spirits, fortified citrus wine, purchased distilled products and byproducts); Premium Branded Spirits (primarily Cruzan Estate Rums and Cruzan Flavored Rums); Bottling Operations (contract bottling services and private label products); and Vinegar and Cooking Wine (bulk vinegar, bulk cooking wine, vinegar stock and private label case goods).

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Information regarding net sales, operating income (loss) and total assets of each of the Company’s business segments and information regarding geographic areas is set forth in Note 13 to the Company’s consolidated financial statements located in Item 8 of this Annual Report on Form 10-K.

Tables 3 and 4 below set forth statement of operation items as a percentage of net sales and information on net sales, gross profit (loss) and operating income (loss) by operating segment.

Table 3 – Statement of Operations as a Percent of Net Sales

Table 4 – Net Sales, Gross Profit (Loss) and Operating Income (Loss) by Operating Segment

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Table 5 below provides unit sales volume data for certain Company products.

Table 5 – Unit Sales Volume Data

The Company is a leading producer and supplier of rum, brandy, wine and spirits to other beverage alcohol manufacturers; produces, imports and markets premium branded spirits; bottles beverage alcohol and other beverages on a contract basis and under private labels; and produces vinegar and cooking wine.

The Company’s net sales and gross margins (gross profit as a percentage of net sales) vary depending on the mix of business among the Company’s products.  Historically, gross margins have been highest in bulk alcohol products and premium branded spirits and lower in bottling operations and vinegar and cooking wine operations.  Within its bottling operations, sales and gross margins have varied substantially based upon the mix of business from the Company’s “Type A” and “Type B” bottling customers.  Type A bottling customers pay the Company to purchase their raw materials and these costs are passed through to the customer.  Type B bottling customers supply their own raw materials and are only charged for bottling charges.  Although gross profit per case for the Company’s Type A and Type B bottling customers is approximately equal, given the same case volume, net sales and cost of goods sold with respect to products bottled for Type A bottling customers are higher, and gross margins are lower, than for Type B bottling customers.  As a result, significant fluctuations in volume of Type A bottling customers can distort the Company’s gross margin.

The size and timing of purchase orders and product shipments can cause operating results to fluctuate significantly from quarter to quarter, particularly since some customers purchase bulk alcohol products in significant quantities at one time or place significant orders at one time for contract bottling services, distilled spirits, vinegar and cooking wine.  Additionally, some Company products generate higher profit margins than others, and changes in the Company’s product mix will therefore cause gross margins to fluctuate.  Certain aspects of the Company’s business are also seasonal, with increased demand for the Company’s contract bottling services from April to October and increased production of the Company’s bulk alcohol products from November to June, corresponding to the Florida citrus-harvest.  As a result of these factors, the Company’s operating results may vary significantly from quarter to quarter.

Net sales represent the Company’s gross sales less excise taxes. Excise taxes are generally payable on sales of certain of the Company’s bulk alcohol products and on all alcohol products bottled by the Company.  However, there are no excise taxes paid on sales made to customers that have tax permits.  Accordingly, excise taxes may vary significantly from period to period depending upon the Company’s product and customer mix.

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Results of Operations

Fiscal 2005 Compared to Fiscal 2004

Net Sales. Net sales were $106.5 million in 2005, an increase of 10.4% from net sales of $96.4 million in 2004.

Net sales of bulk alcohol products were $40.4 million in 2005, an increase of 8.4% from net sales of $37.2 million in 2004.  The increase resulted primarily from increased shipments of rum, citrus spirits and fortified wine offset by decreased shipments of citrus brandy and cane spirits.  The decrease in citrus brandy and cane spirits was due in part to the timing of customer orders and also due to a market decline for these products.  Management believes that the Company’s sales of citrus spirits have increased during 2005 due to a decrease in the recent market surplus of grape spirits which some of the Company’s customers may have been using as an alternative ingredient in their product formulations.  However, management believes that this increase in business could be temporary and that the Company’s sales of citrus spirits could decrease in the future if the market surplus of grape spirits increases.  In 2005, unit sales of citrus brandy and cane spirits decreased 4.3% and 18.0%, respectively, compared to 2004, and the average selling price of citrus brandy decreased 2.6%.  Also in 2005, unit sales of the Company’s rum and fortified wine products increased 3.0% and 7.9%, respectively, compared to 2004, and the average selling price for the Company’s rum increased 4.8% while the average selling price for fortified wine decreased 2.0%.  The average selling prices for these bulk alcohol products varied due to changes in product and customer mix.

Net sales of premium branded spirits were $32.9 million in 2005, an increase of 22.6% from net sales of $26.8 million in 2004.  Sales of the Company’s Cruzan Estate Rums and Cruzan Flavored Rums increased 21.3% in 2005 compared to 2004.  Sales of Cruzan Estate Rums and Cruzan Flavored Rums increased from $2.2 million in Fiscal 1996 to $25.5 million in Fiscal 2005.  During this time, the Cruzan brand has been recognized as one of the fastest growing brands in the spirits industry by certain beverage industry publications and the Cruzan Rums have won numerous tasting awards from several prestigious beverage industry organizations.  Since January 2003, several of the Company’s competitors have introduced their own lines of flavored rum products into the marketplace, which, in certain fiscal quarters, has negatively impacted the level of sales growth of Cruzan Flavored Rums.  Some of the Company’s competitors in the rum and flavored rum categories have significantly greater financial and other resources than the Company, which could adversely affect the Company’s sales growth of Cruzan Estate Rums and Cruzan Flavored Rums. As a response to such increased competition, and in order to provide further impetus to the growth of Cruzan Estate Rums and Cruzan Flavored Rums, management significantly increased its marketing budget in Fiscal 2004 and increased it again for Fiscal 2005 in an effort to support the continued growth of the Company’s Cruzan brand.  This increase in marketing expenses has increased the operating loss for this business segment in Fiscal 2005 and Fiscal 2004.  Management intends to continue its increased expenditures in 2006 to maintain the growth of the Cruzan Rum brand.

Net sales of the Company’s bottling operations were $13.0 million in 2005, an increase of 9.0% from net sales of $11.9 million in 2004.  While sales in the Company’s bottling operations increased 9.0% in 2005, unit volume decreased 15.4% and the average price per case increased 28.9%.  The primary reason for the increase in the average price per case was the addition in August 2005 of a new Type A contract bottling customer for which the Company supplies raw materials in addition to a bottling charge.  Sales in the Company’s bottling operations have declined in recent fiscal years both as a result of a contraction in the ready-to-drink product category, for which the Company is a contract bottler and in the Company’s private label business as a result of a loss of certain large private label bottling customers.  Responding to this decline in business, in July 2004 the Company completed the partial consolidation of its bottling operations to reduce overhead.  However, bottling operations volume did not even meet the Company’s reduced expectations for 2004, which caused a continuing loss in this segment.  The Company has been placing a renewed emphasis on the sales effort in this segment while seeking other contract bottling opportunities.  The Company has explored alternatives in its two bottling facilities, including further consolidation, a partial sale and shedding less profitable product lines.  In December 2004, management discontinued production of all products in the Lake Alfred bottling plant with the exception of one production line bottling vinegar, cooking wine and juices.  In January 2005, the operation of this bottling line was reduced to one shift.  At the present time, the Company has not taken an impairment charge relating to its bottling operations as the carrying value of its bottling assets is less than fair value.

Net sales of vinegar and cooking wine were $20.2 million in 2005, a decrease of 1.0% from net sales of $20.4 million in 2004.  In 2005, total unit sales of vinegar and cooking wine decreased 3.9% compared to 2004,

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although the average selling price per unit increased 3.0%.  The average selling prices of vinegar and cooking wine increased due primarily to a combination of decreased sales of lower priced white distilled vinegar and an increase in sales of higher priced vinegar case goods.

Gross Profit.  Gross profit was $34.7 million in 2005, an increase of 17.2% from gross profit of $29.6 million in 2004.  During 2005, bulk alcohol gross profit decreased $1.1 million primarily due to higher energy costs; premium branded spirits gross profit increased $4.2 million due to sales increases; bottling operations gross loss decreased $1.3 million due to reducing overhead as a result of the Company’s bottling consolidation plan and profit from a new bottling contract of approximately $0.8 million; and vinegar and cooking wine gross profit increased $0.7 million due to an improved product mix.  Gross margin was 32.6% in 2005 and 30.8% in 2004.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $38.3 million in 2005, an increase of 15.3% from $33.2 million in 2004.  The increase was primarily attributable to a $4.1 million increase in administrative, marketing and advertising expenses in the Company’s premium branded spirits business in an effort to support the continued growth of the Company’s Cruzan brand.  Management intends to continue to increase selling, general and administrative expenditures in 2006 to maintain the growth of its Cruzan Rum brand.  Also during 2005, the Company’s corporate overhead increased $0.8 million primarily due to professional fees incurred as a result of the acquisition by V&S of control of the Company.

Payment to be Made by Principal Stockholder.  Pursuant to a letter agreement entered into between Angostura and certain of the Company’s management on June 2, 2005, Angostura agreed to pay to certain of the Company’s management an aggregate amount of $9 million if the sale of Angostura’s controlling interest in the Company to ASCI were completed.  Although this sale was completed on September 26, 2005, as of December 16, 2005, this payment has not been made.  This payment is not the obligation of the Company and was negotiated between certain members of management and the former majority owner without the participation of or ratification by the Company’s board of directors or any committee thereof and does not affect the Company’s balance sheet or cash flow statement.  However, under Staff Accounting Bulletin 107 issued by the Commission relating to accounting for expenses or liabilities paid by principal stockholder(s), this expected payment by Angostura was treated as an expense of the Company in the statement of operations, and as a contribution to additional paid-in capital on the balance sheet.

Operating Income (Loss).  The following table sets forth the operating income (loss) by reportable segment of the Company for 2005 and 2004.

As a result of the above factors, operating loss was $12.6 million in 2005 and $3.6 million in 2004.

The Company’s premium branded spirits segment experienced operating losses of $7.3 million in 2005 and $7.6 million in 2004.  The operating losses reflected the Company’s continuing efforts to increase market share by reinvesting this and other segments’ gross profits in selling and marketing expenses.

As a result of the factors described under “Net Sales” above, the Company’s bottling operations segment reported an operating loss of $3.1 million in 2005 and $3.9 million in 2004.

Interest Expense. Interest expense was $2.7 million in 2005 and $2.2 million in 2004.  The Company’s borrowing rates and average borrowings were higher in 2005 compared to 2004.

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Income Tax Expense.  During 2005 and 2004, the Company incurred operating losses from its U.S. operations and recorded an income tax benefit of $3.9 million and $3.7 million, respectively.  The Company’s Virgin Islands subsidiary has a 90% exemption from U.S. Virgin Islands income taxes.  The exemption is effective through September 2020.  In addition, the Company benefited from the extraterritorial income exclusion in 2005 and 2004.

Fiscal 2004 Compared to Fiscal 2003

Net Sales. Net sales were $96.4 million in 2004, an increase of 6.6% from net sales of $90.4 million in 2003.

Net sales of bulk alcohol products were $37.2 million in 2004, an increase of 5.8% from net sales of $35.2 million in 2003.  The increase resulted primarily from increased shipments of rum and fortified wine offset by decreased shipments of citrus brandy, citrus spirits and cane spirits.  The decrease in citrus brandy, citrus spirits and cane spirits was due in part to the timing of customer orders.  In addition, in 2003, the Company had sales of cane spirits to a new customer that had difficulty sourcing bulk alcohol from its regular supplier.  These sales of approximately $250,000 did not reoccur in 2004.  Management believes that the Company’s sales of citrus spirits declined approximately $176,000 during 2004 due to a market surplus of grape spirits which some of the Company’s customers may have been using as an alternative ingredient in their product formulations.  In 2004, unit sales of citrus brandy and spirits decreased 7.2% and 23.8%, respectively, compared to 2003, and the average selling price of citrus brandy decreased 5.7%.  Also in 2004, unit sales of the Company’s fortified wine products increased 17.4% compared to 2003, although the average selling price for the Company’s fortified wine decreased 3.4%.  The average selling prices for these bulk alcohol products decreased due to management lowering prices as a result of increased competition from grape spirits distillers and foreign wine producers.

Net sales of premium branded spirits were $26.8 million in 2004, an increase of 29.0% from net sales of $20.8 million in 2003.  Sales of the Company’s Cruzan Estate Rums and Cruzan Flavored Rums increased 24.1% in 2004 compared to 2003.  Sales of Cruzan Estate Rums and Cruzan Flavored Rums increased from $2.2 million in Fiscal 1996 to $21.0 million in Fiscal 2004.  During this time, the Cruzan brand has been recognized as one of the fastest growing brands in the spirits industry by certain beverage industry publications and the Cruzan Rums have won numerous tasting awards from several prestigious beverage industry organizations.  Since January 2003, several of the Company’s competitors have introduced their own lines of flavored rum products into the marketplace, which, in certain fiscal quarters, has negatively impacted the level of sales growth of Cruzan Flavored Rums.  Some of the Company’s competitors in the rum and flavored rum categories have significantly greater financial and other resources than the Company, which could adversely affect the Company’s sales growth of Cruzan Estate Rums and Cruzan Flavored Rums. As a response to such increased competition, and in order to provide further impetus to the growth of Cruzan Estate Rums and Cruzan Flavored Rums, management significantly increased its marketing budget for Fiscal 2004 in an effort to support the continued growth of the Company’s Cruzan brand, causing an increase in the operating loss for this business segment.

In August and September 2004, the eyes of three major hurricanes struck within approximately thirty miles of all of the Company’s facilities in Central Florida.  Physical damage to the Company’s facilities of less than $100,000 occurred as a result of these hurricanes.  However, while difficult to quantify, disruptions to business caused by these hurricanes, including several days of plant shut-downs, prolonged loss of power, product shipment interruptions and increased labor costs, contributed to lost sales in the premium branded spirits segment, as well as to the additional costs in the bottling and vinegar and cooking wine segments as discussed below.  The Company and its insurance advisor determined that the losses incurred during these hurricanes, including physical damage and business interruption, did not meet the deductible levels of the Company’s casualty insurance policies due mainly to the fact that each hurricane had a separate deductible requirement and the Company’s disruptions were incurred over the course of all of the hurricanes, as well as the relatively minor physical damage incurred.

Net sales of the Company’s bottling operations were $11.9 million in 2004, a decrease of 16.6% from net sales of $14.3 million in 2003.  During the first quarter of Fiscal 2004, the Company lost a large private label bottling customer.  Net sales to this private label bottling customer were approximately $2.5 million and 193,719 cases for the year ended September 30, 2003, or approximately 17.6% of bottling operations net sales and 5.2% of bottling operations volume.  Also during 2004, excise taxes decreased $4.8 million compared to 2003, primarily due to the decrease in sales to this private label bottling customer.  Sales in the Company’s bottling operations also continued to decline as a result of a contraction in the ready-to-drink product category, for which the Company is a contract bottler.  Responding to this decline, in July 2004 the Company completed the partial consolidation of its

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bottling operations to reduce overhead.  However, bottling operations volume did not even meet the Company’s reduced expectations for 2004, which caused a continuing loss in this segment.  The Company placed a renewed emphasis on the sales effort in this segment, seeking other contract bottling opportunities.  The Company explored other alternatives in its two bottling facilities, including further consolidation, a partial sale and shedding less profitable product lines.  In December 2004, management discontinued production of all products in the Lake Alfred bottling plant with the exception of one production line bottling vinegar, cooking wine and juices.

Net sales of vinegar and cooking wine were $20.4 million in 2004, an increase of 1.3% from net sales of $20.2 million in 2003.  In 2004, total unit sales of vinegar and cooking wine decreased 16.9% compared to 2003, although the average selling price per unit increased 21.9%.  The average selling prices of vinegar and cooking wine increased due to a combination of decreased sales of lower priced white distilled vinegar and bulk cooking wine and a slight increase in sales of higher priced cooking wine case goods.

Gross Profit.  Gross profit was $29.7 million in 2004, a decrease of 4.8% from gross profit of $31.1 million in 2003.  During 2004, bulk alcohol gross profit decreased $1.5 million as a result of higher citrus molasses and citrus concentrate raw material costs; premium branded spirits gross profit increased with sales; bottling operations gross profit decreased with sales and increased costs as a result of hurricane disruptions; and vinegar and cooking wine gross profit decreased $1.0 million due to higher grain alcohol and citrus concentrate raw material cost and increased production costs as a result of hurricane disruptions.  Gross margin was 30.8% in 2004 and 34.4% in 2003.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $33.2 million in 2004, an increase of 32.6% from $25.1 million in 2003.  The increase was primarily attributable to a $7.6 million increase in administrative, marketing and advertising expenses in the Company’s premium branded spirits business in an effort to support the continued growth of the Company’s Cruzan brand.  Also during 2004, the Company’s Compensation and Stock Option Committee approved a new Supplemental Executive Retirement Plan for certain key executives of the Company.  This new plan replaces a deferred compensation plan, which resulted in the cancellation of a $0.7 million liability which was credited to selling, general and administrative expenses.

Operating Income (Loss).  The following table sets forth the operating income (loss) by reportable segment of the Company for 2004 and 2003.

As a result of the above factors, operating loss was $3.6 million in 2004, as compared to operating income of $6.1 million in 2003.

The Company’s premium branded spirits segment experienced operating losses of $7.6 million in 2004 and $2.3 million in 2003.  The operating losses reflected the Company’s continuing efforts to increase market share by reinvesting this and other segments’ gross profits in selling and marketing expenses.

As a result of the factors described under “Net Sales” above, the Company’s bottling operations segment reported an operating loss of $3.9 million in 2004 and $1.9 million in 2003.

Interest Expense. Interest expense was $2.2 million in 2004 and $3.4 million in 2003.  The Company’s borrowing rates and average borrowings were lower in 2004 compared to 2003.

Other Expense.  On November 26, 2002, the Company announced the retirement and resignation of A. Kenneth Pincourt, Jr., its Founder, Chairman and Chief Executive Officer.  The Company entered into a retirement agreement with Mr. Pincourt, setting forth the terms of his retirement and resignation.  The retirement agreement

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replaced Mr. Pincourt’s previous employment agreement. Under the retirement agreement, the Company elected to accelerate retirement benefits under its deferred compensation program and to continue to pay compensation and provide related benefits through July 15, 2004, the remaining term of Mr. Pincourt’s previous employment contract.

Accelerated benefits under the deferred program amounted to $1,040,987, of which $549,220 had been accrued as of September 30, 2002. Mr. Pincourt’s deferred compensation was paid to him on December 13, 2002.  Also under the retirement agreement, Mr. Pincourt continued to receive monthly payments of $41,004 through July 15, 2004, one bonus payment of $150,491, which was paid in October 2003, and a second bonus payment of $119,138, which was paid in August 2004.  Among other benefits, Mr. Pincourt was also able to participate in any health insurance plan, employee benefit plan or other arrangement made available by the Company or its subsidiaries to its executives and key management employees, through July 15, 2004.  The Company recorded a charge for the retirement of Mr. Pincourt during 2003 and there were no charges with respect to this in 2004.  The effect of this charge was included in other expense in the Company’s consolidated statement of operations and amounted to $1,503,925 before income taxes.

The following table summarizes the charge made during 2003 for Mr. Pincourt’s retirement:

On May 22, 2003, the Company announced the retirement of Troy Edwards, its Chief Financial Officer, Secretary, Treasurer and Controller.  The Company recorded a charge for the retirement of Mr. Edwards of $207,683 during the third quarter of Fiscal 2003.  The effect of this charge was included in other expense in the Company’s consolidated statement of operations.

Income Tax Expense.  During 2004 and 2003, the Company incurred operating losses from its U.S. operations and recorded an income tax benefit of $3.7 million and $1.0 million, respectively.  The Company’s Virgin Islands subsidiary has a 90% exemption from U.S. Virgin Islands income taxes.  The exemption is effective through September 2020.  In addition, the Company benefited from the extraterritorial income exclusion in 2004 and 2003.

Financial Liquidity and Capital Resources

General

The Company’s principal use of cash in its operating activities is for labor, overhead and raw materials to be used in its manufacturing operations and purchasing imported products for its premium branded spirits business.  The Company’s source of liquidity has historically been cash flow from operations and its line of credit.  Some of the Company’s manufacturing operations are seasonal and the Company’s borrowings on its line of credit vary during the year.

The Florida citrus harvest is generally during the months from November through June.  The majority of the Florida citrus harvest is processed as fresh fruit juice or juice concentrate.  A byproduct of citrus juice production is citrus molasses which the Company uses as a raw material at its two Florida distilleries to produce citrus brandy and spirits.  Due to the seasonal availability and short “shelf-life” of the citrus molasses raw material, the Company produces its estimated annual customer requirements during a seven-month period, and therefore, carries a higher than normal level of inventory in relation to sales during this seven-month period.  Generally, the Company’s inventory level increases during this seven month period and decreases after the citrus harvest ends when the Company supplies its customers with citrus brandy and spirits from inventory from July through October.

There are no federal regulations that require minimum aging to be designated rum. However, due to the Company’s high quality standards, the Company ages its Cruzan Estate Rums for two to five years and certain of the Company’s super premium rums are aged up to 12 years. Due to the Company’s own aging requirements,

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production of Cruzan Estate Rums is scheduled to meet demand two to three years in the future.  Accordingly, inventories are larger in relation to sales and total assets than for other branded spirits suppliers that do not age their products. Management expects to continue to increase the Company’s inventory of barrel aged rums to meet projected increased sales in the future.

Another seasonal business of the Company is its contract bottling services.  Demand for contract bottling services is highest from April through October.  During these months, the Company’s requirements increase for ingredients, glass bottles, caps, labels, packaging materials and labor.  During 2005, the Company incurred losses from its bottling operations of $3.1 million.  Management has explored alternatives for its two bottling facilities, including further consolidation, a partial sale and shedding less profitable product lines.  In December 2004, management discontinued production of all products in the Lake Alfred bottling plant with the exception of one production line bottling vinegar, cooking wine and juices.   In January 2005, the operation of this bottling line was reduced to one shift.

During 2005, management increased selling, general and administrative expenses in its premium branded spirits segment in an effort to support the continued growth of the Company’s Cruzan brand.  Management intends to continue its increased expenditures in 2006 to maintain the growth of the Cruzan Rum brand.  To the extent that the increased expenditures do not result in increased sales of the Cruzan brand, the Company’s short-term liquidity may be adversely affected.  However, management actively monitors sales and expenditures on an ongoing basis, and retains the ability to adjust its level of expenditures in response to market conditions and in order to maintain sufficient liquidity.

Management believes that cash provided by its operating and financing activities will provide adequate resources to satisfy its working capital, liquidity and anticipated capital expenditure requirements for both its short-term and long-term capital needs.

Operating Activities

Net cash used in operating activities in 2005 was $3.7 million, which resulted from $0.7 million in net loss adjusted for noncash items, and a $3.0 million net change in operating assets and liabilities.

Investing and Financing Activities

Net cash used in investing activities in 2005 was $0.6 million, including capital expenditures of $3.4 million partially offset by principal payments received on notes receivable of $3.2 million.

Net cash provided by financing activities in 2005 was $4.2 million, which resulted primarily from a $3.1 million net increase in borrowings under the revolving credit facility and  $5.5 million from the issuance of common stock off-set by $4.2 million of payments on long-term debt.

In October 2001, the Company entered into a $70 million credit agreement with Wachovia Bank, consisting of a $40 million term loan and a $30 million revolving loan facility.  In March 2004, the revolving loan facility was reduced to $15 million.  The credit agreement was due to expire in January 2006.  On December 14, 2005, the Company entered into a loan arrangement with V&S consisting of a $30 million term promissory note and a $10 million revolving promissory note, both of which are unsecured, bear interest at the applicable LIBOR rate plus 90 basis points and mature on December 15, 2006.  The notes are non-amortizing and have no financial covenant requirements.  On December 16, 2005, the Company used the proceeds of these notes to refinance its existing credit agreement.

The Company’s bank debt was $28.6 million as of September 30, 2005, and its ratio of total debt to equity was 0.60 to 1.

The Company’s share of the undistributed earnings of its Bahamian and Virgin Islands subsidiaries was approximately $47.5 million as of September 30, 2005.  No provision has been made for taxes which would result from the remittance of such undistributed earnings, as the Company intends to reinvest these earnings indefinitely. See Note 10 to the Company’s consolidated financial statements for additional information on income taxes related to these subsidiaries.

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Based on current plans and business conditions, management expects that its cash and cash equivalents, together with any amounts generated from operations and available borrowings, will be sufficient to meet the Company’s cash requirements for at least the next 12 months.

Critical Accounting Policies

The Company’s significant accounting policies are more fully described in Note 1 to the Company’s consolidated financial statements located in Item 8 of this Annual Report on Form 10-K. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosures of contingent assets and liabilities. Actual results could differ from those estimates under different assumptions or conditions. The Company believes that the following critical accounting policy is subject to estimates and judgments used in the preparation of its consolidated financial statements:

The Company has goodwill and intangible assets associated with business acquisitions. The Company reviews these assets for impairment annually and whenever an event occurs or circumstances change that would more likely than not reduce the fair value of these assets below their carrying value. If the fair value of these assets is less than their carrying value, then an impairment loss would be recognized equal to the excess of the carrying value over the fair value of the asset.

Off Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

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Contractual Obligations and Commitments

The following table reflects scheduled maturities of contractual obligations as of September 30, 2005, including principal maturities on long-term debt and future minimum payments on operating leases with terms of one year or more. Purchase obligations include an event sponsorship contract and a contract to purchase spirits.

Notes:

a)              The above table does not include variable rate interest payments on the Company’s long-term debt obligations.  The estimated variable rate interest payments on the Company’s long-term debt are: $924,117 within one year; and $924,117 within two to three years.  These payments are based on the rates in effect as of December 16, 2005, and assume an average of $6 million outstanding under the revolving note, $30 million under the term note, with all long-term debt maturing on December 15, 2006.

Effects of Inflation and Changing Prices

The Company’s results of operations and financial condition have not been significantly affected by inflation and changing prices.  The Company has been able, subject to normal competitive conditions, to pass along rising costs through increased selling prices.

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Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The Company carries certain variable rate debt and thus is exposed to the impact of interest rate changes.  The table above summarizes the Company’s market risk associated with debt obligations as of September 30, 2005, after giving effect to the Company’s refinancing on December 16, 2005.

In the event of an adverse change in interest rates, management would consider taking certain actions, such as an interest rate hedge or swap, to further mitigate the Company’s exposure.  However, due to the uncertainty of the actions that would be taken and their possible effects, this analysis assumes no such actions.  The Company had no derivative financial instruments as of September 30, 2005.

See Note 9 to the Company’s consolidated financial statements for additional information related to Company’s financing arrangements.

Item 8.  Financial Statements and Supplementary Data

The consolidated financial statements and financial statement schedules of the Company and its subsidiaries, and the report of independent registered public accounting firm, are listed at Item 15.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that the information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognized that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.  The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report.  Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the design and operation of the Company’s disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

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Changes in Internal Control Over Financial Reporting

In addition, management, including the Company’s Chief Executive Officer and Chief Financial Officer, reviewed the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act), and there have been no changes in the Company’s internal controls during the fourth quarter of Fiscal 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10.  Directors and Executive Officers of the Registrant

BOARD OF DIRECTORS, COMMITTEES AND EXECUTIVE OFFICERS

The following table sets forth information with respect to the directors and executive officers of the Company.

In accordance with the Company’s Certificate of Incorporation, the Board of Directors of the Company is divided into three classes, designated Class I, Class II and Class III.  The maximum number of members of the Board of Directors is currently seven.

Class I Directors (term expires – 2008 Annual Meeting)

Donald L. Kasun - Mr. Kasun joined the Company as a director in December 2001.  Since 1978, Mr. Kasun has been president of Kasun Development Corp., an industrial real estate development and management company, and senior vice president of Southern Container Corp., a privately-held manufacturer of paperboard and corrugated boxes.

Ola Salmén - Mr. Salmén joined the Company as a director effective October 11, 2005 and was appointed Chairman on December 13, 2005.  Mr. Salmén has been Senior Vice President Finance of V&S since 2002.  Prior to joining V&S, Mr. Salmén was Chief Financial Officer of Adcore AB, a Swedish public IT consulting firm.  From 1997 until 2002, Mr. Salmen served as Financial Director and Director of Risk Control for Handelsbanken Markets.  Mr. Salmén is a citizen of Sweden.

Class II Directors (term expires – 2006 Annual Meeting)

Leonard G. Rogers - Mr. Rogers joined the Company as a director in 1992.  He was Chairman of the Board of the Company from 1974 to 1985 and since 1985 has been a private investor.  From 1969 to 1974, Mr. Rogers was Senior Vice President - Consumer Products Division for American conglomerate Gulf & Western Industries.

Mats Andersson - Mr. Andersson joined the Company as a director effective October 11, 2005.  Mr. Andersson has been Senior Vice President Business Development of V&S since 1999.  Prior to serving in this capacity, Mr. Andersson was the Vice President of the Wines Division of V&S from 1994 through 1999.  Mr. Andersson is a citizen of Sweden.

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Lisa Derman - Ms. Derman joined the Company as a director effective October 11, 2005.  Ms. Derman has been the General Counsel of ASCI since January 2005.  Prior to joining ASCI, Ms. Derman was employed by Schieffelin & Somerset, the national importer for Dom Perignon, Hennessey, Tanqueray and Johnnie Walker, where she served as Senior Counsel from July 2001 to January 2004.  From 1994 to 2000, she was employed by the national law firm McDermott Will & Emery LLP as an associate or consultant where she specialized in alcohol beverage regulatory law and distributor relations.

Class III Directors (term expires – 2007 Annual Meeting)

Edward F. McDonnell - Mr. McDonnell joined the Company as a director in 1998.  Mr. McDonnell is Chairman and Chief Executive Officer of The Premier Group, a company he founded in 1995.  The Premier Group owns beverage alcohol distributing companies in the Caribbean, Philippines and South Pacific.  Prior to founding The Premier Group, Mr. McDonnell served with The Seagram Company Ltd. from 1981 in various executive capacities, including as a director and Executive Vice President of The Seagram Company Ltd. and President of The Seagram Spirits and Wine Group.

Ketil Eriksen - Mr. Eriksen joined the Company as a director effective October 11, 2005.  Mr. Eriksen has been president of V&S Absolut Spirits since January 2005.  Prior to joining V&S, he was Chief Executive Officer of Colgate-Palmolive Sweden & Finland from May 1999 to January 2005.  Mr. Eriksen is a citizen of Norway.

Executive Officers

Certain information relating to each executive officer of the Company (other than those set forth above) is set forth below.

Jay S. Maltby - Mr. Maltby joined the Company in 1995 as President, Chief Operating Officer and a director and was appointed as Chairman of the Board and Chief Executive Officer in 2002.  Mr. Maltby resigned from the Company’s board of directors effective September 30, 2005.  Prior to joining the Company, Mr. Maltby served with Bacardi Imports, Ltd. from 1978 in various executive capacities, including as a member of Bacardi’s Executive Committee and Vice President of Finance and Operations.

Thomas A. Valdes - Mr. Valdes joined the Company in 1995 as Executive Vice President and, prior to his resignation from our board of directors on September 30, 2005, had been a director of the Company since 1996.  Prior to joining the Company, Mr. Valdes held various executive positions with Bacardi Imports, Ltd., a beverage alcohol marketing company, from 1979, the latest of which was Vice President of Marketing and Operations.

Ezra Shashoua – Mr. Shashoua joined the Company as Executive Vice President, Chief Financial Officer and Secretary in June 2003.  Prior to joining the Company, Mr. Shashoua worked at NationsRent, Inc., a national equipment rental chain, where he served as Executive Vice President and Chief Financial Officer from January 2001 to June 2003.  Prior to joining NationsRent, Mr. Shashoua worked at 7-Eleven, Inc., a national convenience store chain, in Dallas, Texas, where he served in various capacities of increasing responsibility from 1982 to January 2001, the latest of which was Vice President and Chief Financial Officer.  Mr. Shashoua began his career as an attorney at Sonnenschein, Nath and Rosenthal in Chicago, Illinois.

D. Chris Mitchell - Mr. Mitchell joined the Company in 1984 as manager of the Company’s bottling operations.  Mr. Mitchell was promoted to Vice President - Sales in 1989 and appointed as Senior Vice President - Sales in 1994.   Prior to his resignation from the Company’s board of directors, effective September 30, 2005, Mr. Mitchell had been a director of the Company since 1991.  Prior to joining the Company, Mr. Mitchell was general manager of bottling operations for United States Distilled Products, a beverage alcohol marketing company, from 1980 to 1984.

Ousik Yu - Mr. Yu joined the Company in 1990 and served as Vice President - Bottling Operations since that time until his appointment as Senior Vice President - Beverage Division in 1994.  In 1996, Mr. Yu was appointed as Senior Vice President - Manufacturing.  From 1986 to 1989, Mr. Yu was employed by Brown-Forman Corporation, a beverage alcohol manufacturing and marketing company, most recently as manager of packaging/process engineering.  From 1981 to 1986, he was employed in plant engineering by The Stroh’s Brewery Company, a beverage alcohol company.

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Committees

The Board of Directors has an Audit Committee and a Compensation and Stock Option Committee.  The Board does not have a standing nominating committee or a charter with respect to the process for nominating directors for election to the Company’s Board of Directors.  The Company qualifies as a “controlled company” under American Stock Exchange rules, as ASCI controls more than 50% of the Company’s voting power, as evidenced by the Company’s ownership records.  As a result, the American Stock Exchange continued listing standards do not require the Company to have a nominating committee or a written charter.

Audit Committee

The Audit Committee:  (i) appoints the Company’s independent auditors and monitors the independence of the Company’s independent auditors; (ii) reviews the Company’s policies and procedures on maintaining its accounting records and the adequacy of its internal controls; (iii) reviews management’s implementation of recommendations made by the independent auditors and internal auditors; (iv) considers and pre-approves the range of audit and non-audit services performed by independent auditors and fees for such services; and (v) reviews and votes on all transactions between the Company and any of its officers, directors or other affiliates.  The Audit Committee held five meetings during Fiscal 2005.  The Board of Directors has adopted a written charter for the Audit Committee, which has been previously filed with the Commission.

In Fiscal 2005, the Audit Committee consisted of Donald L. Kasun, Leonard G. Rogers and Edward F. McDonnell.  Messrs. Kasun, McDonnell and Rogers are “independent,” satisfying the American Stock Exchange listing requirements.

The Board has determined that Mr. Rogers, one of the Company’s independent directors, is an audit committee financial expert as defined by Commission rules and is financially sophisticated as defined by American Stock Exchange rules.

Compensation and Stock Option Committee

The Compensation and Stock Option Committee of the Board of Directors was established to determine the cash and other incentive compensation, if any, to be paid to the Company’s executive officers. The Compensation and Stock Option Committee is also responsible for the administration of and awards under the Company’s 2004 Employee Stock Option Plan (the “2004 Option Plan”).  This Committee met three times during Fiscal 2005.  This Committee currently consists of Messrs. Kasun and Rogers.  Because the Company qualifies as a “controlled company” under American Stock Exchange rules, the American Stock Exchange continued listing standards regarding Executive Compensation are not applicable to the Company.

Shareholder Nominations to Board of Directors

Shareholders and members of the Company’s Board submit nominees for election to the Company’s Board of Directors to the entire Board for its consideration.  There have been no changes to the procedures by which stockholders may recommend nominees to the Board of Directors.

The Company’s Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the Board of Directors at the Company’s Annual Meeting of Stockholders.  Historically, the Company has not had a formal policy concerning stockholder recommendations to the Board of Directors.  To date, other than from Angostura and ASCI, the Company’s former and current controlling stockholders, respectively, the Company has not received any recommendations from stockholders requesting that the Board consider a candidate for inclusion among the slate of nominees in the Company’s Proxy Statement.  The absence of such a policy does not mean, however, that a recommendation would not have been considered had one been received.  The Board would consider any candidate proposed in good faith by a stockholder.  To do so, a stockholder should send the candidate’s name, credentials, contact information, and his or her consent to be considered as a candidate to the Company’s Chief Executive Officer, Jay S. Maltby.  The proposing stockholder should also include his or her contact information and a statement of his or her share ownership (how many shares owned and for how long).

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In evaluating director nominees, the Board considers the following factors:

•                                          the appropriate size of the Company’s Board of Directors;

•                                          the needs of the Company with respect to the particular talents and experience of its directors;

•                                          the knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;

•                                          familiarity with the beverage alcohol industry;

•                                          experience in political affairs;

•                                          experience with accounting rules and practices; and

•                                          the desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.

The Company’s goal is to assemble a Board of Directors that brings together a variety of perspectives and skills derived from high quality business and professional experience.  In doing so, the Board will also consider candidates with appropriate non-business backgrounds.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board of Directors may also consider such other factors as it may deem are in the best interests of the Company and its stockholders.  The Board does, however, believe it appropriate for at least one, and, preferably, several, members of the Board to meet the criteria for an “audit committee financial expert” as defined by Commission rules and for a “financially sophisticated” audit committee member as defined by American Stock Exchange rules.

The Board of Directors identifies nominees by first evaluating the current members of the Board willing to continue in service.  Current members of the Board with skills and experience that are relevant to the Company’s business and who are willing to continue in service are considered for re-nomination.  If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above.  Current members of the Board of Directors are polled for suggestions as to individuals meeting the criteria described above.  The Board may also engage in research to identify qualified individuals.  To date, the Company has not engaged third parties to identify or evaluate or assist in identifying potential nominees, although the Company reserves the right in the future to retain a third party search firm, if necessary.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and anyone who beneficially owns 10% or more of the Company’s Common Stock, to file with the Commission and the American Stock Exchange initial reports of beneficial ownership and reports of changes in beneficial ownership of Common Stock.  Such persons are required by regulations of the Commission to furnish the Company with copies of all Section 16(a) forms they file.

Based solely upon on a review of (i) copies of the Section 16(a) filings received by the Company during or with respect to Fiscal 2005 and (ii) certain written representations of its officers and directors with respect to the filing of annual reports of changes in beneficial ownership on Form 5, the Company believes that each filing required to be made pursuant to Section 16(a) of the Exchange Act during and with respect to Fiscal 2005 was filed in a timely manner, except that the following individuals each filed a Form 5 reporting the failure to timely file a Form 4 to report the acquisition, as of June 21, 2005, of shares of common stock in our rights offering:

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Code of Ethics

The Company has adopted a Code of Ethics applicable to its Chief Executive Officer, Chief Financial Officer, Controller and other employees performing similar functions.  In addition, the Company has adopted a Code of Business Conduct and Ethics applicable to all directors, officers and employees.  Both Codes are available on the Company’s website at http://www.cruzaninc.com.  The Company also intends to post any amendments to, or waivers from, either Code on the Company’s website.  In addition, the Company will also provide to any person without charge, upon request, a copy of either or both Codes.  Such request may be made in writing to Ezra Shashoua, the Company’s Executive Vice President and Chief Financial Officer at 222 Lakeview Avenue, Suite 1500, West Palm Beach, Florida 33401, or by phone at (561) 655-5677.

Item 11.  Executive Compensation

Summary Compensation Table

The following table sets forth information concerning the annual and long-term compensation for services in all capacities to the Company for the fiscal years ended September 30, 2005, 2004 and 2003, of the Chief Executive Officer and the other four most highly compensated executive officers of the Company serving as of September 30, 2005.

(1)                                  Amounts awarded under the Company’s discretionary bonus arrangement.

(2)                                  Includes, in all cases other than to Mr. Shashoua in 2003, amounts awarded under the Company’s defined contribution pension plan.

(3)                                  Represents consulting fees paid by the Company to Mr. Shashoua for consulting services provided prior to his joining the Company on June 6, 2003.

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Supplemental Executive Retirement Program

During Fiscal 2004, the Company implemented a defined benefit supplemental executive retirement plan (“SERP”) for certain executive officers, including the five current executive officers named in the Summary Compensation Table.  The SERP is a nonqualified deferred compensation plan providing life insurance protection during employment and subsequent retirement benefits.  The SERP replaces the Company’s Executive Nonqualified Deferred Compensation Program, which was cancelled during Fiscal 2004.

For the fiscal year ended September 30, 2005, the Company expensed $331,514 with regard to the SERP for the benefit of the participants.

The formula for determining the monthly retirement benefit for each executive was derived by making an estimate of the dollar amount which would equal 30-40% of the executives’ anticipated cash compensation at retirement, and subtracting from this amount estimated benefits from social security and the Company’s defined contribution pension plan.

For all of the named executive officers, upon the termination of the executive’s employment after attainment of age 65, the Company will pay the executive a monthly retirement benefit over a period of 15 years, as set forth below.  Retirement prior to age 65 with consent of the Company shall result in a reduced retirement benefit based on years of service.  In the event the executive becomes permanently and totally disabled while in the employ of the Company, the Company will pay the executive a monthly disability benefit over a period of five years in an amount equal to the monthly retirement benefit pro rated over a five-year vesting period, with full vesting on February 20, 2009.  In the event of the death of the executive prior to retirement, the executive’s beneficiary shall receive a death benefit as set forth below.

In the event of cessation of employment with the Company for any reason other than death, disability or retirement, the executive will not be entitled to benefits under the SERP.  In addition, the executive will forfeit all rights to benefits under the SERP if the executive engages in competition with the Company during the 2 years following cessation of employment with the Company.

Under the terms of the SERP, unless the executive is terminated for cause, the Company may not terminate the SERP without the executive’s consent beginning nine months before a “Change of Control.”  Under the SERP, a “Change of Control” took place on September 26, 2005, when ASCI completed the purchase of its controlling equity stake in the Company from Angostura.

The following table sets forth the expected benefits under the SERP for each of the named executive officers at September 30, 2005:

Employment Agreements

The Company has employment agreements with each of Messrs. Maltby, Valdes, Shashoua, Mitchell and Yu.  The agreements expire at various dates through June 2009 and are subject to automatic renewal for a one-year period unless prior notice is given.  Under these agreements, these executives receive the following minimum combined base salary and bonus per year, as may be adjusted from time to time:  Mr. Maltby, $717,479; Mr. Valdes, $455,789; Mr. Shashoua, $417,221; Mr. Mitchell, $320,552; and Mr. Yu, $298,940.  These agreements also provide that the executives are entitled to participate in all Company compensation arrangements or plans, including the

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Company’s discretionary bonus arrangement, the SERP, the employee stock option plan and pension plan.  The foregoing is a summary of the material terms of these employment agreements and is qualified by reference to the text of the agreements, which have been filed as exhibits to the Company’s filings with the Commission.

Payments to Our Executive Officers from Angostura

Pursuant to a letter agreement entered into between Angostura, Jay S. Maltby, Thomas A. Valdes and Ezra Shashoua, on June 2, 2005, Angostura agreed to pay to certain of the Company’s Management, including these three executive officers, an aggregate amount of $9 million if the sale of Angostura’s controlling interest in the Company to ASCI were completed.  Although this sale was completed on September 26, 2005, to the Company’s knowledge this payment has not yet been made.

Stock Options

Option Grants In Last Fiscal Year

The following table provides information regarding stock options granted to the five named executive officers during Fiscal 2005.  In addition, the table shows the hypothetical gains of “option spreads” that would exist for the respective options.  These gains are based on assumed rates of annual compound stock price appreciation of 5% and 10% from the date the options were granted over the full option term.