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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.20549
FORM 1O-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended: June 30, 2000
Commission File No. 000-27237
HAND BRAND DISTRIBUTION, INC.
--------------------------------------------------------------------------------
(Exact name of small business issuer in its charter)
FLORIDA 66-0622463
(State of Incorporation) (IRS Employer Identification No.)
9845 N.E. 2nd Avenue
Miami Shores, FL 33138
(Address of principal executive offices)
(305) 759-8710
--------------
Issuer's Telephone No.
Check 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 during the past 12
months (or 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.
Yes [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 2,533,400 shares of common stock, as
of August 11, 2000.
Transitional Small Business Disclosure Format: No
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PART I- FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Registrant's Financial Statements are filed herewith following the
signature page.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - filed
following the financial statements
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 27. Financial Data Schedule
(b) EXHIBITS
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HAND BRAND DISTRIBUTION, INC.
August 14, 2000 By: /s/ JOHN TAGGART
--------------------
John Taggart
President and Principal
Financial Officer
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TABLE OF CONTENTS
PAGE NO.
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Independent Accountants' Review Report 4
Balance Sheets - June 30, 2000 (Unaudited) 5
Statements of Income - For the Three Months
Ended June 30, 2000 and 1999 (Unaudited) 7
Statement of Changes in Stockholders' Equity -
For the Three Months Ended June 30, 2000
(Unaudited) 8
Statement of Cash Flows - For the Three Months
Ended June 30, 2000 and 1999 (Unaudited) 9
Notes to Financial Statements 11
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HAND BRAND DISTRIBUTION, INC.
FINANCIAL STATEMENTS
QUARTER ENDED JUNE, 30 2000
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders
of Hand Brand Distribution, Inc.
Miami, Florida
We have reviewed the accompanying balance sheet of Hand Brand Distribution, Inc.
(a Florida corporation) as of June 30, 2000, and the related statements of
operations, changes in stockholders' equity, and cash flows for the three months
then ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Hand Brand Distribution, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying June 30, 2000 financial statements in order for them
to be in conformity with generally accepted accounting principles.
The financial statements for the year ended December 31, 1999 were audited by
us, and we expressed an unqualified opinion on our report dated February 7,
2000, but we have not performed any auditing procedures since that date.
SEWELL AND COMPANY, PA
Hollywood, Florida
August 11, 2000
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HAND BRAND DISTRIBUTION, INC.
BALANCE SHEETS
JUNE 30, 2000 (Unaudited) AND DECEMBER 31, 1999 (Audited)
JUNE 30, DECEMBER 31,
2000 1999
--------- ---------
Accounts payable $ 46,343 $ 14,408
Sales taxes payable 45 498
Note payable, current portion 39,761 19,419
--------- ---------
Total current liabilities 86,149 34,325
Long term liabilities
Notes payable, less current maturity of $19,761 207,401 212,472
Shareholders' equity
Common stock $.002 par value, authorized
12,500,000 shares; issued and outstanding:
2,533,400 and 2,524,100 shares 5,073 5,048
Additional paid in capital 787,877 738,202
Retained deficit (614,864) (476,825)
--------- ---------
178,086 266,425
--------- ---------
$ 471,636 $ 513,222
========= =========
See notes to financial statements.
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HAND BRAND DISTRIBUTION, INC.
BALANCE SHEETS
JUNE 30, 2000 (Unaudited) AND DECEMBER 31, 1999 (Audited)
JUNE 30, DECEMBER 31,
2000 1999
-------- --------
Cash $ 6,876 $ 24,070
Accounts receivable (net of allowance for
doubtful accounts of $27689 and $2,282) 10,341 11,974
Inventory 152,689 161,127
Employee advances --
Other current assets 6,346 5,600
-------- --------
Total current assets 176,252 202,771
Fixed assets (net of accumulated depreciation
of $68,909 and $58,823) 125,913 135,999
Other assets
Deposits 3,944 2,025
Goodwill and trademarks (net of accumulated
amortization $46,733 and $43,283) 156,856 163,756
Deferred tax asset 6,711 6,711
Other assets 1,960 1,960
-------- --------
169,471 174,452
-------- --------
$471,636 $513,222
======== ========
See notes to financial statements.
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HAND BRAND DISTRIBUTION, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED JUNE 30,
------------------------------------------------------------------
THREE MONTHS SIX MONTHS
---------------------------- ---------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income
Sales net of returns $ 63,157 $ 98,267 142,104 165,910
Cost of sales (16,919) (42,632) (45,061) (72,564)
--------- --------- --------- ---------
Gross profit 46,238 55,635 97,043 93,346
Expenses
General and administrative expenses 110,865 58,802 204,154 147,443
Printing and publications 4,717 347 9,706 2,047
Interest expense 256 4,236
Depreciation and amortization 8,568 8,538 16,986 16,947
--------- --------- --------- ---------
124,406 67,687 235,082 166,437
--------- --------- --------- ---------
Net loss (78,168) (12,052) (138,039) (73,091)
========= ========= ========= =========
EARNING PER SHARE
Net loss per common share $ (0.03) $ (0.01) $ (0.05) $ (0.03)
--------- --------- --------- ---------
</TABLE>
See notes to financial statements.
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HAND BRAND DISTRIBUTION, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- PAID IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1998 1,815,100 $ 3,630 $ 367,870 $(221,157) $ 150,343
Issuance of common stock
($.002 per share) 709,000 1,418 370,332 371,750
Net loss December 31, 1999 (255,668) (255,668)
--------- --------- --------- --------- ---------
Balance December 31, 1999 (Audited) 2,524,100 5,048 738,202 (476,825) 266,425
Private offering on January 27, 2000 9,300 19 46,481 46,500
Issuance of shares of common stock to Steven
M Polisar at $1. per share on June 5, 2000 3,200 6 3194 3,200
Net loss six months ended June 30, 2000 (138,039) (138,039)
--------- --------- --------- --------- ---------
Balance June 30, 2000 (Unaudited) 2,536,600 $ 5,073 $ 787,877 $(614,864) $ 178,086
========= ========= ========= ========= =========
</TABLE>
See notes to financial statements.
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HAND BRAND DISTRIBUTION, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(138,039) (73,091)
--------- ---------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 16,986 16,947
(Increase) decrease in accounts receivable 1,633 (4,656)
(Increase) decrease in inventories 8,438 (47,167)
(Increase) in other assets (2,665)
Increase (decrease) in accounts payable and accrued liabilities 31,482 (9,246)
Increase in accrued interest payable -- 12,000
--------- ---------
Total adjustments 55,874 (32,122)
--------- ---------
Net cash used by operating activities (82,165) (105,213)
--------- ---------
Cash flows from investing activities:
Cash payments for the purchase of property -- (1,500)
--------- ---------
Net cash used by investing activities -- (1,500)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 49,700 371,750
Proceeds from a callable convertible debenture 20,000 --
Principal payment on long term debt (4,729) --
--------- ---------
Net cash provided by financing activities 64,971 371,750
--------- ---------
Net increase in cash and cash equivalents (17,194) 265,037
Cash and cash equivalents, beginning of year 24,070 2,649
--------- ---------
Cash and cash equivalents, end of year $ 6,876 267,686
========= =========
</TABLE>
See notes to financial statements.
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HAND BRAND DISTRIBUTION, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
2000 1999
------- ----
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense $ 4,236 $ --
------- ----
Shareholders' equity note:
For the six months ended June 30, 1999 the company issued 709,000 of shares of
common stock in exchange of 371,750 warrants exercised. The proceeds from the
warrants exercised were $ 371,750.
See notes to financial statements.
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HAND BRAND DISTRIBUTION, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 1 UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule
310(b) of Regulation SB. Accordingly, they do not include all of the
information and footnote disclosures normally included in complete
financial statements prepared in accordance with generally accepted
accounting principles. For further information, such as significant
accounting policies followed by the Company, refer to the notes to the
Company's audited financial statements.
In the opinion of management, the unaudited financial statements
include all necessary adjustments (consisting of normal, recurring
accruals) for a fair presentation of the financial position, results of
operations and cash flow for the interim periods presented. The results
of operations for the three months ended March 31, 2000 and 1999 are
not necessarily indicative of operating results to be expected for a
full year.
NOTE 2 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Hand Brand Distribution, Inc. ("the Company") was incorporated in
November 1995, under the laws of the State of Florida for the purpose
of developing and marketing nutritional supplements, cleaning and
hygiene products. It also publishes a news catalog to market its
products.
BASIS OF ACCOUNTING
The Company presents its financial statements on the accrual basis of
accounting in compliance with generally accepted accounting principles.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, which requires a liability
approach to calculating deferred income taxes.
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HAND BRAND DISTRIBUTION, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 2 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of the accompanying financial statements in conformity
with generally accepted accounting principles requires management to
make certain estimates and assumptions that directly affect the results
of reported assets and liabilities and disclosure of contingent assets
and liabilities as of the balance sheet date, and the reported amounts
of revenues and expenses for the period presented. Actual results could
differ from these estimates.
CASH AND CASH EQUIVALENTS
The Company considers all cash and cash equivalents highly liquid
investments with an original maturity of three months or less to be
cash equivalents.
INVENTORY
The inventory of the Company is recorded at average cost and includes
nutritional supplements, cleaning and hygiene products and raw
materials from the acquisition of The Rockland Corporation, doing
business as Lifetime Water.
REVENUE RECOGNITION
The Company's products are manufactured to specific customer orders,
and revenues are recognized when the products are shipped. Revenue is
reduced for estimated customer returns and allowances.
The Company publishes a catalog of its products for mail order
marketing, which includes articles on the health benefits of its
products. Subscriptions are for two-year periods, and revenue is
recognized when the subscription order is received. Unearned
subscription revenue is amortized using the straight-line method over
the term of the subscription. The amount of the subscription revenue
was not material in any year.
ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible.
Accordingly, no allowance for doubtful accounts is required. If amounts
become uncollectible, they will be charged to operations when that
determination is made.
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HAND BRAND DISTRIBUTION, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2000
NOTE 2 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
PROPERTY AND EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is computed by
using the straight-line method based over the assets estimated useful
lives as follows:
Furniture and fixtures 5 - 10 years
INTANGIBLE ASSETS
The Company continually evaluates the carrying value of goodwill and
other intangible assets to determine whether there are any impairment
losses. If indicators of impairment are present in intangible assets
used in operations, and future cash flows are not expected to be
sufficient to recover the assets' carrying amount, an impairment loss
would be charged to expense in the period identified.
No reduction for impairment of intangible assets was necessary at June
30, 2000.
AMORTIZATION
Amortization of trademarks and goodwill is determined utilizing the
straight-line method based generally on the estimated useful lives of
the intangibles as follows:
Trademarks 15 years
Goodwill 15 years
CREDIT RISK
Financial instruments that potentially subject the Company to credit
risk include cash on deposit with two financial institutions amounting
to $6,676 at March 31, 2000, which was insured for up to $200,000 by
the U.S. Federal Deposit Insurance Corporation (FDIC).
ADVERTISING
Advertising costs are charged to operations when incurred. Advertising
costs during the three months ended March 31, 2000 amounted to $0.
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HAND BRAND DISTRIBUTION, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 3 COMMON STOCK AND PREFERRED STOCK
The Company authorized 12,500,000 shares of common stock, and 2,533,400
shares of common stock issued and outstanding.
On March 31, 2000, the Company issued 9,300 shares of common stock at a
price of $5. per share in connection with a private placement for a
total amount of $46,500 in cash.
On June 5, 2000 the Company issued 3,200 shares of common stock at a
price of $1.00 per share for a total of $3,200 in cash.
NOTE 4 LONG-TERM NOTE PAYABLE
<TABLE>
<CAPTION>
<S> <C>
7% note payable guaranteed jointly by the Company and John M. Taggart; due in
monthly installments of $2,902.73, including interest; beginning January 1st,
1999 for 10 years $ 227,162
6% note payable for a 24 month period, callable and convertible into 40,000
shares of common stock. 20,000
---------
Less: current maturities (39,761)
---------
Total long-term note payable $ 207,401
=========
Interest expense for the three months ended June 30, 2000 was $3,980.
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto that appear elsewhere herein.
We generate revenues from two sources: Subscription revenue from the
publication Family Health News comprises 1.4% of our revenue and the sale of
products comprise 98.6% of our revenue. All products other than our water filter
line are purchased from other manufacturers. We seek distributor pricing from
our vendors that is typically 42% of the manufacturers suggested retail price.
This enables us to have sufficient margin after selling costs still make a
profit.
Sales for the quarter ended June 30, 2000 were $63,157 a 24.5% decrease
from sales for the quarter ender June 30, 1999. Decrease was due to a reduced
level of sales activity. This trend is expected to reverse as Hand Brand
implements its direct sales organization during the second half of 2000.
Cost of goods sold as a percentage of sales was 35.6% for the quarter
ended June 30, 2000 as compared to 44.2% for the quarter ended June 30, 1999
reflecting a greater proportion of sales being from private label products.
Selling, general and administrative expenses were $110,865 for the
quarter ended June 30, 2000. This was 170% of sales compared to 131% of sales
for the quarter ended June 30, 1999. This increase was due primarily to
increased marketing expenses during the quarter.
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