10-K/A 1 d10ka.txt AMENDMENT #1 TO FORM 10K ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10-K/A Amendment No. 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended July 31, 2002 Commission File Number: 1-14091 ----------------- SHERWOOD BRANDS, INC. (Exact Name of Registrant as Specified in Its Charter) North Carolina 56-1349259 (State or Other Jurisdiction of (IRS Employer Identification Number) Incorporation) 1803 Research Blvd., Suite 201 Rockville, Maryland 20850 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (301) 309-6161 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Class A Common Stock, $.01 Par Value Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of issuer'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. [X] The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant as of October 21, 2002 (computed by reference to the last reported sale price of the Registrant's Common Stock on the American Stock Exchange on such date) was $8,144,255. The number of shares outstanding of Registrant's Class A Common Stock, $.01 par value per share, as of October 21, 2002 was 2,778,375. Number of shares outstanding of Registrant's Class B Common Stock, $.01 par value per share was 1,000,000. The Class B Common Stock is not publicly traded. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the Registrant's definitive Proxy Statement pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, which will be filed with the Commission subsequent to the date hereof, are incorporated by reference into Part III of this Form 10-K. ================================================================================ SHERWOOD BRANDS, INC. FORM 10-K/A Explanatory Note This Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended July 31, 2002 ("Original 10-K") reflects the addition of information to Part I. Other than the aforementioned change, all other information included in the Original 10-K is unchanged. This Amendment No. 1 does not reflect events occurring after the filing of the Original 10-K. TABLE OF CONTENTS
Page ---- PART I ITEM 1. BUSINESS........................................................... 3 ITEM 2. PROPERTIES......................................................... 9 ITEM 3. LEGAL PROCEEDINGS.................................................. 9 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 9 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K......................................................... 10 SIGNATURES.................................................................. 12
2 PART I. Item 1. Business General Sherwood Brands, Inc. (the "Company") was incorporated in December 1982 in the state of North Carolina. Sherwood Brands, Inc. is engaged in the manufacture, marketing and distribution of a diverse line of brand name candies, cookies, chocolates and gifts. The Company manufactures jelly beans, lollipops, biscuits and soft and hard candies and assembles seasonal gift items including gift baskets for Christmas and Easter. The Company's principal branded products are COWS(TM) butter toffee candies, DEMITASSE(R) biscuits, RUGER(R) wafers, SMILE POPS(R) lollipops, STRIP-O-POPS(R) lollipops and ELANA(R) Belgian chocolates. The Company also markets, SOUR FRUIT BURST(TM) fruit-filled hard candies, as well as holiday specialty products, such as PIRATE'S GOLD COINS(R) milk chocolates for Christmas and TOKENS OF LOVE(TM) milk chocolates for Valentine's Day. The Company's marketing strategy, including its packaging of products, is designed to maximize freshness, taste and visual appeal, and emphasizes highly distinctive, premium quality products that are sold at prices that compare favorably to those of competitive products. The Company believes that all of its operations are part of the confectionery industry and it currently reports as a single industry segment. Sherwood Brands, Inc. is the owner of Sherwood Brands, LLC, a Maryland limited liability company. Sherwood Brands, LLC markets and distributes its own line of confectionery products in the United States. Sherwood Overseas, Inc. (a wholly-owned subsidiary of Sherwood Brands, LLC) was incorporated in July 1993 in the Bahamas to market and distribute the Sherwood lines of confectionery products internationally. Sherwood Brands of RI, Inc. is a wholly owned subsidiary of Sherwood Brands, Inc. that was incorporated in September, 1998 in the state of Rhode Island. Sherwood Brands of RI, Inc. d/b/a E. Rosen Company manufactures hard candies and jelly beans and assembles and markets gift items and baskets to chains such as Wal-Mart, Kmart and CVS. Sherwood Acquisition Corporation, a wholly-owned subsidiary of the Company, was incorporated in April, 2002 in the state of Wyoming. On May 1, 2002 Sherwood Acquisition merged with and into Asher Candy Acquisition Corporation, a Wyoming corporation. Asher Candy Acquisition Corporation is a manufacturer of candy canes and other hard candies under the "Asher" name. The surviving corporation of the merger is Asher Candy Acquisition Corporation, which has changed its name to Asher Candy, Inc. The Company issued an aggregate of approximately 270,559 shares of its common stock values at $1,675,000 to the shareholders of Asher Candy Acquisition Corporation in consideration for the transaction, subject to escrows for indemnification and adjustments based on a final audit, as well as warrants exercisable for Sherwood Brands common stock valued at $108,000. Asher Candy generated no revenue from May 1, 2002 through July 31, 2002. Market Overview Sales of candy and cookie products in the United States have increased significantly in recent years. According to the United States Department of Commerce, manufacturers' domestic shipments of confectionery products (excluding chewing gum) have increased from approximately $9 billion in 1990 to $23.8 billion in 2001. The Chocolate Manufacturers Association/National Confectioners Association has estimated that total retail sales of confectionery products in the United States in 2001 were approximately $24.0 billion. Despite the growth, the United States ranks only fifth in per capita candy consumption among the industrialized nations. Halloween generates the highest volume of sales($2.025 billion in sales), followed by Easter ($1.815 billion), Christmas ($1.500 billion) and Valentines Day ($1.090 billion). The Company believes that the expanding candy market in the United States presents attractive growth opportunities for its business, and is focusing on introducing new products in these holiday categories as well as achieving greater brand recognition and market penetration for all of the Company's products. The markets for candy and cookie products are dominated by a number of large, well capitalized corporations. In the candy market, these companies include Hershey Food Corporation, M&M Mars and Nestle S.A. The cookie and biscuit market is dominated by Nabisco, Inc., Keebler Company and Sunshine Biscuits, Inc. In addition to domestic manufacturers, foreign candy and cookie companies, such as Lindt of Switzerland, Bahlsen KG, and Storck, have established their products in United States. The Company believes that the remainder of the market is highly fragmented, with numerous manufacturers and hundreds of products and distribution channels, such as mass merchandisers, drug stores, club stores, vending companies and gourmet distributors. Management believes that the Company's experience in these markets and distribution channels, coupled with 3 its expanded manufacturing capabilities, should enable the Company to capitalize on growth opportunities in these markets. Products Internationally Manufactured Candy, Cookies and Chocolates Following is a description of products that the Company sells, which are purchased from third-party sources located outside of the United States: COWS(TM): COWS is a line of butter toffee candy offering both a soft and chewy toffee and a dairy butter and cream hard candy. COWS butter toffee candies are made with real dairy butter and cream and are sold in 7 oz. bags, in tubs, and in bulk, and are packed in foil fresh packs to preserve freshness and extend shelf life. COWS butter toffee candies are also packaged as gift items in decorative tins and milk jars. COWPOKES(TM) LOLLIPOPS: COWPOKES are an extension of the COWS line and are made with a hard dairy butter and cream candy on the outside and a soft, chewy butter toffee on the inside. Cowpokes are available in 6.4 oz. bags and are also distributed in 60-count check-out stand display cartons for single-item sales. SOUR FRUIT BURST(TM) HARD CANDIES: SOUR FRUIT BURST is a line of fruit-filled hard candies that are available in a variety of flavors, are sold in 3 oz. and 12 oz. bags, and in a variety of other packages. In 2000, the Company introduced Fruit Burst Gourmet Jelly Beans. RUGER(R) WAFERS: RUGER wafers is a line of wafer cookie, including sugar free varieties, available in four flavors: chocolate, vanilla, lemon and coffee. The RUGER wafer cookie formula, designed by the Company, utilizes an aeration process which gives RUGER wafers its very light and delicate filling. RUGER wafers are distributed in a mylar packaging material that resists sunlight and humidity and is designed to preserve freshness and extend shelf life. ELANA(R) BELGIAN CHOCOLATES: ELANA Belgian chocolate bars are sold in a variety of flavors, including mint, caramel, mocca, truffle, crispers, and almonds. COUNTDOWN TO CHRISTMAS(TM) CHOCOLATE CALENDARS: COUNTDOWN TO CHRISTMAS chocolate calendars are advent calendars made with 24 milk-chocolate candies behind numbered doors. The calendar is marketed domestically for the Christmas holiday season. PIRATE'S GOLD COINS(TM) FOIL-WRAPPED CHOCOLATE COINS: PIRATE'S GOLD COINS is a milk chocolate candy product designed in coin shapes and wrapped in embossed gold foil. They are offered in two sizes of mesh bags, 2lb. 10oz. tubs and in bulk, and are marketed primarily for the Christmas holiday season. TOKENS OF LOVE(TM) CHOCOLATE CANDIES: TOKENS OF LOVE is a line of milk chocolate candy product in token shapes, wrapped in foil with expressions of love and friendship. They are offered in two sizes of mesh bags and in bulk, and are marketed primarily for Valentine's Day. ZED GUM: On July 9, 2001 the Company entered into its first distribution agreement for a non-company brand name product. Under the agreement, the Company is the exclusive distributor of Zed Gum in the United States. As the distributor of Zed Gum, the Company has the opportunity to increase its presence in the kids novelty and everyday gum market. The Company and the manufacturer of Zed Gum plan to develop products specifically for the United States including products designed and trademarked by the Company under the ZED name. The product line meets the Company's requirements for high quality, exceptional package design and value. Since the Company began marketing the product to its customers in 2001, orders for the product have steadily increased. Domestically Manufactured Candies and Biscuits Following is a description of products the Company manufactures: STRIP O POPS(TM) LOLLIPOPS: STRIP O POPS(TM) are a line of hard candy lollipops merchandised in hanging strips. They are available in a variety of flavors and are designed for the holiday season as well as year round sales. 4 SMILE POPS(TM) LOLLIPOPS: SMILE POPS(TM) are a line of candy iced lollipops individually wrapped and sold in tubs, poly bags or in hanging strips. Each pop is decorated with a smiling face. GUMMI SKULLS(TM) JELLY PRODUCTS: GUMMI SKULLS(TM) are a line of soft candies shaped as a human skull and available in an assortment of flavors such as mint, orange and spice. TONGUE TATTOO(TM) LOLLIPOPS: TONGUE TATTOO lollipops are a line of hard candy lollipops embossed with candy icing images. The iced image transfers when pressed on the tongue creating a tongue tattoo. COWSCARAMELS(TM): COWSCARAMELS is a line of caramel candy. Flavored fillings include vanilla, cappuccino and butter and cream. The candies are offered in both a soft and chewy toffee and as a dairy butter and cream hard candy. The COWSCARAMEL production line is certified kosher by the Orthodox Union. DEMITASSE(TM) BISCUITS: DEMITASSE is a line of tea biscuits offered in a variety of flavors including the traditional tea biscuit, "Petit Beurre" (with real butter), cinnamon honey, coconut and chocolate. The DEMITASSE biscuit line is certified kosher by the Orthodox Union. JELLIES: The Company manufactures pan cast soft jelly candy know as "jelly beans" or "jelly eggs". They are available in a variety of flavors, colors and sizes. Jelly candy may be packaged for individual sale or may be incorporated into one of the Company's seasonal gift basket offerings, such as those prepared for Easter sales. CANDY CANES: The Company manufactures a variety of packages, sizes, color and flavors, ranging from traditional peppermint canes to high-end gourmet lines. In addition, the Company manufactures premium flavor candy canes which include amaretto, merlot, Irish creme, Dutch chocolate, maraschino cherry and blueberry cheesecake. Assembled Holiday Gift Items and Gift Baskets The Company assembles a variety of custom made gift sets and gift baskets. The gift sets and gift baskets are typically designed for a particular holiday such as Christmas, Valentine's Day or Easter. The gift sets and gift baskets may contain gourmet food products, candy, novelty items or seasonal merchandise. A significant portion of the contents of the gift sets and gift baskets are assembled from components imported from China. Suppliers Some of the Company's products are manufactured by third party sources to specific recipe and design specifications developed by the Company. These third party sources are located in Argentina, Austria, Belgium, Holland, Germany, Italy, and Ireland. The Company's operations require it to have production orders in place in advance of shipment to the Company's warehouses (product deliveries typically take 60 days). Generally, the Company's foreign suppliers deliver finished products free on board to a freight forwarder, cargo consolidator or directly to a seaport for ocean transport. The Company assumes the risk of loss, damage or destruction of products, although the Company maintains cargo insurance. Upon entry into the United States, the products are then transported by rail or truck to one of the six regional warehouses used by the Company. The Company has long-term relationships with the manufacturers of ELANA(R) Belgian chocolates, RUGER Wafers, and PIRATE'S GOLD COINS(TM) milk chocolates. Generally, these manufacturers have agreed not to export into the United States, and in certain cases, other countries, any products similar to those produced for the Company. The Company has no formal written agreements with its manufacturers and has no formal commitment to purchase minimum volumes of products. However, on an annual basis the Company and the manufacturer will agree upon volumes and prices and establish a delivery schedule based upon the Company's forecast. On July 9, 2001, the Company entered into its first distribution agreement for a non-company brand name product, Zed Gum. The agreement is for an indefinite term and terminates only upon a material breach by either party or upon the mutual consent of both parties. Under the terms of the Company's agreement with the manufacturer of ZED gum, there was no minimum purchase requirement during the first year. Commencing July 2002, the minimum purchase requirement became 1,000,000 Euros. The Company requires that its suppliers maintain product liability insurance with the Company as an additional named insured. The loss of any one supplier would not have a material adverse effect on the Company's business. 5 The Company purchases the necessary ingredients and packaging materials, which are used in its products, manufactured at its Pawtucket, RI facility, New Hyde Park, NY facility and Chase City, VA production facilities from numerous third-party suppliers. These ingredients and packaging materials include flour, sugar, shortening, flavorings, butter, folding cartons, shipping cartons and wrapping film. The purchases are made on an open account basis with competitive payment terms. Most of the components used in the Company's line of holiday gift sets and gift baskets are assembled at its Central Falls, RI facility and are purchased from manufacturers located in Asia, principally China. In addition, the Company purchases some components from domestic sources on an open account basis. Customers The Company sells its products primarily to mass merchandisers, other retail customers, grocery and drug store chains, club stores, convenience stores, specialty shops and wholesalers. The Company's mass merchandise customers include Family Dollar, Target, Dollar General, K-Mart and Wal-Mart. For the year ended July 31, 2002, Sam's Club and Wal-Mart accounted for 29% and 14% of the Company's total net sales respectively. For the year ended July 31, 2001, Sam's Club and Wal-Mart accounted for 27% and 14% of the Company's total net sales. For the year ended July 31, 2000 Wal-Mart comprised 15% of the Company's total net sales. The loss of either Sam's Club or Wal-Mart as a customer would result in a significant decrease in the Company's revenues and profits. Vending companies are the Company's second largest customer category. ELANA Belgian chocolates, RUGER wafers, COWS butter toffee candies and SOUR FRUIT BURST candies are available in vending machines as well as through traditional outlets. The Company believes that the visibility of its products in vending channels enhances market acceptance and consumer appeal of the Company's products in other distribution channels. The Company also sells its products to numerous gourmet distributors throughout the United States. These distributors in turn sell the Company's products to a wide base of gourmet stores. The Company believes that it has been able to penetrate this customer segment because of its ability to satisfy consumer demand for premium quality products at prices that are attractive to these distributors. Distribution Channels The Company distributes its products throughout the United States, Puerto Rico and Canada. Net sales of the Company's products in the Canadian market accounted for less than 1% of the Company's total net sales fiscal 2002. The Company engages independent food and candy brokers in various regions throughout the United States for marketing to retail stores. These brokers account for a majority of the Company's sales. Food and candy brokers are paid on a commission basis (typically 5% of sales generated by them) and are generally responsible in their respective geographic markets for identifying customers, soliciting orders and inspecting merchandise on store shelves. As of July 31, 2002, the Company had arrangements with approximately 65 food and candy broker organizations. These arrangements typically prohibit the brokers from selling competing products during the term of their engagement with the Company. The Company believes that the use of brokers, enhances the quality and scope of the Company's sales operations. In addition, the use of brokers permits the Company to limit the costs associated with creating and maintaining a direct distribution network. The Company's executive officers and six regional sales managers work with the brokers on an individual basis and are responsible for managing the broker network, identifying opportunities and developing sales in their respective territories. The Company uses six regional bonded public warehouses that specialize in food and confectionery storage. These warehouses are selected based on proximity to the Company's customers, their ability to provide prompt customer service and their efficient and economic delivery. Generally, the Company sells its products pursuant to customer purchase orders and fills these orders from inventory within one to two days of receipt. Because these purchase orders are filled shortly after receipt, backlog is not material to the Company's business. Substantially all of the Company's products are delivered by common carrier. 6 Manufacturing and Assembly Facilities The Company has two manufacturing facilities and three assembly facilities. The Company currently manufactures hard candy, soft candy, jellies, Demitasse biscuits and COWSCARAMEL Caramel candies at its Chase City, VA facility. The Chase City facility consists of a brick building with over 100,000 square feet (including a 1,750 square foot office) situated on approximately ten acres in Southern Virginia. The facility recently had approximately 25,000 square feet added to accommodate the consolidation of the Company's Pawtucket, RI facility which was closed in May 2002. The facility is equipped with state-of-the-art equipment for the manufacture and packaging of cookie and candy products and employs approximately 240 skilled and unskilled workers. The facility is certified kosher by the Orthodox Union. The Company also has a 73,000 square foot packaging and storage facility located on approximately 15 acres in Keysville, VA. Both the Chase City and Keysville facilities have access to a supply of both skilled and unskilled labor. In addition, the Southern Virginia area in which the two plants are located, is readily accessible to common carriers, rail lines and a major seaport (Newport News). The Company leases approximately 411,000 square feet of improved real estate in Pawtucket and Central Falls, RI at which it assembles holiday gift items, stores inventory (397,000 square feet) and provides office space (14,000 square feet). Both Rhode Island facilities have access to both skilled and unskilled labor, and are readily accessible to common carriers, rail lines and a major seaport (Boston). The Company leases approximately 30,000 square feet of improved real estate in New Hyde Park, NY. The property is used for manufacturing candy canes. The location has access to both skilled and unskilled labor, and is readily accessible to common carriers and a major seaport (New York). In May 2000, the Company entered into a capital lease agreement with the New Bedford Redevelopment Authority to lease a 430,000 square foot building in New Bedford, MA. The facility is used for assembly and storage of components. Under the terms of the lease the Company made an initial payment of $400,000 and paid rent of $25,000 per annum for years one and two and is committed to pay $41,666.66 per annum for years three through twenty. The Company has an option to purchase the building at any time during the lease term for $1,200,000 minus any amounts of rental payments made. The Company's Vice President--Manufacturing Operations is responsible for the operations at the Virginia, New York and Rhode Island facilities. The Company currently employs technical and production personnel who have working knowledge of the technical and operational aspects of the Company's production equipment. The Company also employs personnel to conduct quality control testing at the facilities through on-site laboratory analysis and quality assurance inspections. The inspectors evaluate the Company's products on the basis of subjective factors such as taste and appearance. The Company monitors the efficiency of the production equipment continuously and its facilities are climate controlled where required. Marketing, Sales and Advertising The Company believes that product recognition by retail and wholesale customers, consumers and food brokers is an important factor in the marketing of its products. Accordingly, the Company promotes its products and brand names through the use of attractive promotional materials, including full-color product brochures and newspaper inserts, advertising in trade magazines targeted to the mass merchandisers, vending industry, gourmet trade and gift basket markets, and participation in trade shows. For the year ended July 31, 2002, the Company spent approximately $1,127,000 on advertising and product promotion and for the years ended July 31, 2001 and 2000 the Company spent approximately $980,000 and $716,000, respectively. The Company also promotes its products through sales discounts and advertising allowances. Promotional programs are generally used most during the initial introduction of a product. As distribution of the new product increases, the Company gradually shifts from promotion to direct advertising in order to reinforce trade and consumer repeat purchasing. Management believes that these promotional programs have shortened the time periods necessary to achieve market penetration of its products. The Company intends to continue to develop and implement marketing and advertising programs to increase brand recognition of its products and to emphasize favorable pricing compared to competing products. 7 Competition The Company faces significant competition in the marketing and sale of its products. The Company's products compete for consumer recognition and shelf space with candies, cakes, cookies, chocolates and other food products which have achieved international, national, regional and local brand recognition and consumer loyalty. These products are marketed by companies (which may include the Company's suppliers) with significantly greater financial, manufacturing, marketing, distribution, personnel and other resources than the Company. Certain of these competitors, such as Hershey Food Corporation, M&M Mars, Inc., Nestle, S.A., Nabisco, Inc., Keebler Company and Sunshine Biscuits, Inc., dominate the markets for candy and cookie products, and have substantial promotional budgets which enable them to implement extensive advertising campaigns. The food industry is characterized by frequent introductions of new products, accompanied by substantial promotional campaigns. Competitive factors in these markets include brand identity, product quality, taste and price. The Company's major competitors for holiday gift items and gift baskets are Houston Harvest Co., Smith Enterprises, Inc. and Wonder Treats. The Company's major competitors for Candy Canes are Bob's Candies, Inc, Spangler Candy Company, Allan Candy Company. Trademarks The Company holds United States trademark registrations for the "ELANA," "RUGER", "TONGUE TATTOO", "STRIP-O-POP", "SMILE POPS" and "demitasse" names, and has filed trademark registrations for certain other names, including "COWS," and uses other names for which it has not applied for registration. The Company believes that its rights to these names are a significant part of the Company's business and that its ability to create demand for its products is dependent to a large extent on its ability to exploit these trademarks. The Company's failure to protect its trademarks and other intellectual property rights could negatively impact the value of its brand names. The Company is currently involved in a legal proceeding involving intellectual property rights. The Company is not aware of any other infringement claims or other challenges to the Company's rights to use these marks. The Company is applying for the international registration of all its trademarks. Government Regulation The Company is subject to extensive regulation by the United States Food and Drug Administration, the United States Department of Agriculture and by other state and local authorities in jurisdictions in which the Company's products are manufactured or sold. Among other things, such regulations govern the importing, manufacturing, packaging, storing, distribution and labeling of the Company's products, as well as sanitary conditions and public health and safety. Applicable statutes and regulations governing the Company's products include "standards of identity" for the content of specific types of products, nutritional labeling and serving size requirements and general "Good Manufacturing Practices" with respect to manufacturing processes. The Company's manufacturing facilities and manufactured products are subject to periodic inspection by federal, state and local authorities. The Company believes that it is in compliance with all governmental laws and regulations and maintains all permits and licenses required for its operations. Insurance The Company maintains product liability insurance with limits of $2,000,000 in the aggregate and $1,000,000 per occurrence (with excess coverage of $10,000,000), which it believes is adequate for the types of products currently offered by the Company. Employees As of October 16, 2002, the Company had approximately 318 full-time employees and approximately 700 part-time or seasonal employees. Of the Company's full-time workforce, 21 are located at the Company's principal office in Rockville, MD. The Company has approximately 240 full and part-time employees in Virginia and approximately 557 full, part-time and seasonal employees in Rhode Island and Massachusetts and 200 full, part-time and seasonal employees in its New Hyde Park, NY facility. Management believes that the Company's relationship with its employees is good. The employees at the Asher Candy facility are the Company's only employees represented by labor unions under a collective bargaining agreement. 8 Item 2. Properties The following table sets forth, with respect to properties leased and owned by the Company at July 31, 2002, the location of the property, the size of the property, the annual rent and the year in which the lease expires, if applicable, and the business use which the Company makes of such facilities:
Approximate --------------------- Square Annual Expiration Address Feet Rent of Lease Business Use ------- ---------- --------- ---------------- ---------------------------- Leased Properties: 1803 Research Boulevard 5,500 $ 125,000 January 31, 2009 Executive and General Office Rockville, MD 20850 1005 Main Street.......... 14,000 $ 100,893 October 2004 General Office Pawtucket, RI 02860 280 Rand Street........... 397,000 $ 384,667 October 2004 Assembly facility, Storage Central Falls, RI 02863 And Distribution facilities 1815 Gilford Avenue 30,000 $ 271,296 March 2004 Manufacturing Plant New Hyde Park, NY 27 Healy Street........... 430,000 $ 25,000 June 2020 Assembly facility, Storage New Bedford, MA 02745 (Yr 1-2) And Distribution $ 41,667 (Yr 3-20) Owned Properties: 807 South Main Street..... 100,000 Manufacturing Plant Chase City, VA 23924 350 Sherwood Drive........ 73,000 Assembly/Manufacturing Plant Keysville, VA 23947
The Company believes that its existing facilities are well maintained and in good operating condition. Item 3. Legal Proceedings The Company is from time to time involved in litigation incidental to the conduct of its business. The Company is currently involved in several legal proceedings involving intellectual property rights, collection of receivables, and other matters. The Company does not believe that the outcome of these matters would materially affect the Company's operations. There can be no assurance that the Company will not be a party to other litigation in the future. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the quarter ended July 31, 2002. 9 PART IV. Item 14. Exhibits, Financial Statements and Reports on Form 8-K (c) Exhibits Number Description ------ ----------- 3.1 Articles of Incorporation, as amended, of the Registrant. (1) 3.2 Bylaws, as amended, of the Registrant.(1) 4.1 Form of Registrant's Class A Common Stock Certificate.(2) 4.2 Form of Underwriter's Warrant Agreement, including Form of Warrant Certificate.(2) 4.3 Form of Public Warrant Agreement among the Registrant, Paragon Capital Corporation, as Underwriter and Continental Stock Transfer & Trust Company, as Warrant Agent.(2) 4.4 Form of Registrant's Public Warrant Certificate.(2) 10.1 Amended and Restated Reimbursement Agreement between Central Fidelity National Bank and the Registrant, dated as of May 1, 1997.(1) 10.2 Loan Agreement between Industrial Development Authority of Mecklenburg County, Virginia and the Registrant, dated as of May 1, 1997.(1) 10.3 Irrevocable Letter of Credit dated May 15, 1997 issued on behalf of the Registrant to the Trustee for the holders of Industrial Revenue Bonds (Series 1997) issued by the Industrial Development Authority of Mecklenburg County, Virginia.(1) 10.4 Amended and Restated Credit Line Deed of Trust and Security Agreement, among the Registrant and Trustees, for the benefit of Central Fidelity National Bank dated May 1, 1997.(1) 10.5 Pledge and Security Agreement between the Registrant and Central Fidelity National Bank, dated as of May 1, 1997.(1) 10.6 Guaranty between Uziel Frydman, the Registrant and Central Fidelity National Bank, dated as of May 1, 1997.(1) 10.7 Loan Agreement between Industrial Development Authority of Mecklenburg County, Virginia and the Registrant, dated as of June 1, 1996.(1) 10.8 Irrevocable Letter of Credit dated June 20, 1996 issued on behalf of the Registrant to the Trustee for the holders of Industrial Revenue Bonds (Series 1996) issued by the Industrial Development Authority of Mecklenburg County, Virginia.(1) 10.9 Pledge and Security Agreement between the Registrant and Central Fidelity National Bank, dated as of June 1, 1996.(1) 10 Number Description ------ ----------- 10.10 Company Loan Agreement between the Industrial Development Authority of Mecklenburg County, Virginia Loan Agreement through the Virginia Small Business Financing Administration and the Registrant, dated as of June 20, 1996.(1) 10.11 Revolving Loan Fund Agreement between the Registrant and Lake Country Development Corporation, $250,000 Promissory Note to Lake Country Development Corporation, Guaranty of Note by the Registrant and Uziel Frydman, and Deed of Trust between the Registrant and Trustee for Lake Country Development Corporation, all dated May 15, 1996.(1) 10.12 Loan Agreement, Promissory Note, and Security Agreement between the Registrant and First Union National Bank, all dated November 29, 1996, and Guaranty between Uziel Frydman and First Union, dated November 29, 1996.(1) 10.13 Promissory Note issued to Ilana Frydman by the Registrant, dated August 28, 1991.(1) 10.14 Lease, as amended, for the Registrant's Rockville offices, executed November 30, 1992.(1) 10.15 1998 Stock Option Plan.(2) 10.16 Employment Agreement between Registrant and Uziel Frydman, dated May 6, 1998.(2) 10.17 Form of Employment Agreement between Registrant and Anat Schwartz, dated May 6, 1998.(2) 10.18 Form of Employment Agreement between Registrant and Amir Frydman, dated May 6, 1998.(2) 10.19 Receiver's Bill of Sale by Allen M. Shine, as receiver of E. Rosen Company, dated September 24, 1998.(3) 10.20 Loan and Security Agreement between the Registrant and First Union National Bank, dated June 12, 2001.(4) 10.21 First Amendment to Loan and Security Agreement between the Registrant and Wachovia Bank, National Association, dated April 30, 2001.(5) 10.22 First Amendment to Employment Agreement between the Registrant and Uziel Frydman, dated August 1, 2001.(6) 10.23 First Amendment to Employment Agreement between the Registrant and Amir Frydman, dated August 1, 2001.(6) 10.24 First Amendment to Employment Agreement between the Registrant and Anat Schwartz, dated August 1, 2001.(6) 21.1 Subsidiaries of the Registrant.(5) 23.1 Consent of BDO, LLP(5) 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(filed herewith) 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(filed herewith) -------- (1) Incorporated herein by reference to the Company's Registration Statement on Form SB-2, dated as of January 21, 1998 (Registration No. 333-44655) (2) Incorporated herein by reference to Amendment No. 2 to the Company's Registration Statement on Form SB-2, dated as of May 4, 1998 (Registration No. 333-44655) (3) Incorporated herein by reference to the Company's Current Report on Form 8-K, dated as of October 9, 1998. (4) Incorporated herein by reference to the Registrant's Amendment No.1 to the Registration Statement on Form 3-3/A, dated as of September 2002 (registration No. 333-92012). (5) Incorporated herein by reference to the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on October 29, 2002 (6) Incorporated herein by reference to the Company's Definitive Proxy Statement, filed with the Securities and Exchange Commission on November 21, 2002 11 SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Amended Report to be signed on its behalf by the undersigned, thereunto duly authorized on the date indicated. Date: December 19, 2002 SHERWOOD BRANDS, INC. By: /s/ UZIEL FRYDMAN ------------------------------ Uziel Frydman President and Chief Executive Officer By: /s/ AMIR FRYDMAN ------------------------------ Amir Frydman Executive Vice President, Treasurer and Director By: /s/ CHRISTOPHER J. WILLI ------------------------------- Christopher J. Willi Chief Financial Officer, Secretary By: /s/ DOUGLAS A. CUMMINS ------------------------------ Douglas A. Cummins Director By: /s/ JEAN CLARY ------------------------------ Jean Clary Director By: /s/ GUY BLYNN ------------------------------ Guy Blynn Director 12 CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT of 2002 I, Uziel Frydman, Chairman of the Board, President and Chief Executive Officer of Sherwood Brands, Inc. (Sherwood), certify that: I have reviewed this annual report on Form 10-K/A of Sherwood; Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of Sherwood as of, and for, the periods presented in this annual report. Date: December 19, 2002 /s/ UZIEL FRYDMAN ----------------------------- Uziel Frydman President and Chief Executive Officer I, Christopher J. Willi, Chief Financial Officer of Sherwood Brands, Inc. (Sherwood), certify that: I have reviewed this annual report on Form 10-K/A of Sherwood; Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of Sherwood as of, and for, the periods presented in this annual report. Date: December 19, 2002 By: /s/ CHRISTOPHER J. WILLI ------------------------------- Christopher J. Willi Chief Financial Officer, Secretary 13 Exhibit Index Exhibit No. Description ---------- ----------- 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.