<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 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 May 21, 2000.
Transitional Small Business Disclosure Format: No
<PAGE> 2
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
*Previously filed.
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.
May 24, 2000 By: /s/ JOHN TAGGERT
---------------------------------
John Taggert
President and Principal Financial
Officer
<PAGE> 3
ITEM 1
HAND BRAND DISTRIBUTION, INC.
FINANCIAL STATEMENTS
THREE MONTHS ENDED
MARCH 31, 2000
<PAGE> 4
HAND BRAND DISTRIBUTION, INC.
FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
TABLE OF CONTENTS
Balance Sheets - March 31, 2000 (Unaudited) and
December 31, 1999 (Audited)
Statements of Operations - For the Three Months
Ended March 31, 2000 and 1999 (Unaudited)
Statement of Changes in Stockholders' Equity -
For the Three Months Ended March 31, 2000
(Unaudited)
Statement of Cash Flows - For the Three Months
Ended March 31, 2000 and 1999 (Unaudited)
Notes to Financial Statements
<PAGE> 5
HAND BRAND DISTRIBUTION, INC.
BALANCE SHEETS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 (AUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------- --------
<S> <C> <C>
Cash $ 10,369 $ 24,070
Accounts receivable (net of allowance for
doubtful accounts $2,282) 6,245 11,974
Inventory 152,683 161,127
Employee advances 5,723
Other current assets 33,873 5,600
-------- --------
Total current assets 208,893 202,771
Fixed assets (net of accumulated depreciation
of $63,791 and $58,823) 131,031 135,999
Other assets
Deposits 3,944 2,025
Goodwill and trademarks (net of accumulated
amortization $46,733 and $43,283) 160,306 163,756
Deferred tax asset 6,711 6,711
Other assets 1,960 1,960
-------- --------
172,921 174,452
-------- --------
$512,845 $513,222
======== ========
</TABLE>
See notes to financial statements.
<PAGE> 6
HAND BRAND DISTRIBUTION, INC.
BALANCE SHEETS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 (AUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ---------
<S> <C> <C>
Accounts payable $ 32,550 $ 14,408
Taxes payable 79 498
Note payable, current portion 19,761 19,419
--------- ---------
Total current liabilities 52,390 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 5,067 5,048
Additional paid in capital 784,683 738,202
Retained deficit (536,696) (476,825)
--------- ---------
253,054 266,425
--------- ---------
$ 512,845 $ 513,222
========= =========
</TABLE>
See notes to financial statements.
<PAGE> 7
HAND BRAND DISTRIBUTION, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (59,871) $ (61,039)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 8,418 8,409
(Increase) decrease in accounts receivable 5,729
(Increase) decrease in inventories 8,444 (18,037)
(Increase) decrease in other assets (35,915)
Increase (decrease) in accounts payable 17,723 (312)
Increase (decrease) in accrued interest payable 6,000
--------- ---------
Total adjustments 4,399 (3,940)
--------- ---------
Net cash used by operating activities (55,472) (64,979)
--------- ---------
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 46,500 319,500
Principal payment on long term debt (4,729)
--------- ---------
Net cash provided by financing activities 41,771 319,500
--------- ---------
Net increase in cash and cash equivalents (13,701) 253,021
Cash and cash equivalents, beginning of year 24,070 2,649
--------- ---------
Cash and cash equivalents, end of year $ 10,369 $ 255,670
========= =========
</TABLE>
See notes to financial statements.
<PAGE> 8
HAND BRAND DISTRIBUTION, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
--------- ---------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense $ 3,980 $ --
========= =========
</TABLE>
<PAGE> 9
HAND BRAND DISTRIBUTION, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,2000 AND 1999 (UNAUDITED)
Three Months Ended March 31,
------------------------------
2000 1999
--------- ---------
Income
Sales net of returns $ 78,947 $ 67,643
Cost of sales (28,142) (29,932)
--------- ---------
Gross profit 50,805 37,711
Expenses
General and administrative expenses 97,269 88,641
Printing and publications 4,989 1,700
Depreciation and amortization 8,418 8,409
--------- ---------
110,676 98,750
--------- ---------
Net loss (59,871) (61,039)
========= =========
EARNING PER SHARE
Net loss per common share $ (0.02) $ (0.03)
See notes to financial statements.
<PAGE> 10
HAND BRAND DISTRIBUTION, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
-------------------------- Paid in Retained
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
Net loss March 31, 2000 (59,871) (59,871)
--------- ---------- ---------- ---------- ----------
Balance March 31, 2000 (Unaudited) 2,533,400 $ 5,067 $ 784,683 $ (536,696) $ 253,054
========= ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE> 11
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.
<PAGE> 12
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.
<PAGE> 13
HAND BRAND DISTRIBUTION, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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 March 31, 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 $10,369 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.
<PAGE> 14
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.
NOTE 4 INVENTORIES
Inventories consisted of the following:
March 31, December 31,
2000 1999
-------- ------------
Finished goods $ 79,043 $ 85,307
Raw materials 73,640 75,820
-------- --------
Total $152,683 $161,127
======== ========
NOTE 5 FIXED ASSETS
Fixed assets consisted of the following:
March 31, December 31,
2000 1999
--------- ------------
Furniture and fixtures $ 57,837 $ 57,837
Computers and software 16,711 16,711
Equipment 120,274 120,274
--------- ---------
194,822 194,822
Less accumulated depreciation (63,791) (58,823)
--------- ---------
Total $ 131,031 $ 135,999
========= =========
Depreciation expense for the three months ended March 31, 2000
was $4,968.
<PAGE> 15
HAND BRAND DISTRIBUTION, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 6 INTANGIBLE ASSETS
At March 31, 2000, intangible assets are summarized by major
classification as follows:
<TABLE>
<CAPTION>
TFN LIFETIME TOTAL
--- -------- -----
<S> <C> <C> <C>
Trademark $ 12,500 $ 95,131 $ 107,631
Goodwill 99,408 0 99,408
--------- --------- ---------
111,908 95,131 207,039
Less accumulated amortization (26,122) (20,611) (46,733)
--------- --------- ---------
Total $ 85,786 $ 74,520 $ 160,306
========= ========= =========
</TABLE>
The goodwill represents the excess of the cost over the fair
value of net assets of the acquired business, The Family News,
Inc.
Amortization expense for the three months ended March 31, 2000
was $3,450.
NOTE 7 LONG-TERM NOTE PAYABLE
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
Less: current maturities (19,761)
---------
Total long-term note payable $ 207,401
=========
Interest expense for the three months ended March 31, 2000 was
$3,980.
<PAGE> 16
ITEM 2
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 March 31, 2000 were $78,947 a 16.5%
increase over sales for the quarter ender March 31, 1999. Decrease was due to a
reduced level of sales activity. This increase is attributed to sales generated
over the internet and an increase in wholesale purchases. This trend is expected
to increase as Hand Brand develops its direct sales organization during 2000.
Cost of goods sold as a percentage of sales was 35.6% for the quarter
ended March 31, 2000 as compared to 44.2% for the quarter ended March 31, 1999
reflecting a greater proportion of sales being from private label products.
Selling, general and administrative expenses were $97,269 for the
quarter ended March 31, 2000. This was 123% of sales compared to 131% of sales
for the quarter ended March 31, 1999. This decrease was due primarily to
decreased marketing expenses during the quarter.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,369
<SECURITIES> 0
<RECEIVABLES> 6,245
<ALLOWANCES> 0
<INVENTORY> 152,683
<CURRENT-ASSETS> 208,893
<PP&E> 131,031
<DEPRECIATION> 34,213
<TOTAL-ASSETS> 512,845
<CURRENT-LIABILITIES> 52,390
<BONDS> 207,407
0
0
<COMMON> 5,067
<OTHER-SE> 784,683
<TOTAL-LIABILITY-AND-EQUITY> 512,845
<SALES> 78,947
<TOTAL-REVENUES> 78,947
<CGS> 28,142
<TOTAL-COSTS> 110,676
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,624
<INCOME-PRETAX> (59,871)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59,871)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
