Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2000 Commission file number 0-18761
HANSEN NATURAL CORPORATION
Delaware                                39-1679918
(State or other jurisidiction of             (I.R.S. Employer
incorporation or organization                Identification No.)
2380 Railroad Street, Suite 101,
Corona, California 92880-5471
Registrant's telephone number, including area code:
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 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.
Yes X No
The registrant had 9,928,519 shares of common stock
outstanding as of July 31, 2000
<PAGE>
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
<S>              <C>                                                                          <C>
Page No.
Part I.           FINANCIAL INFORMATION
Item 1.           Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999                                                          3
Consolidated Statements of Operations for the
three and six-months ended June 30, 2000 and 1999                              4
Consolidated Statements of Cash Flows for the
six-months ended June 30, 2000 and 1999                                        5
Notes to Consolidated Financial Statements                                     6
Item 2.           Management's Discussion and Analysis of Financial
Condition and Results of Operations                                            7
Items 1-5.        Not Applicable                                                                16
Item 6.           Exhibits and Reports on Form 8-K                                              16
Signatures                                                                    16
JUNE 30, 2000 AND DECEMBER 31, 1999 (Unaudited)
June 30,           December 31,
2000                  1999
----                  ----
<S>                                                                               <C>                    <C>
Cash and cash equivalents                                                          $          121,609     $       2,009,155
Accounts receivable (net of allowance for doubtful
accounts, sales returns and cash discounts of $525,748
in 2000 and $415,305 in 1999 and promotional allowances
of $2,021,216 in 2000 and $1,651,604 in 2000)                                           7,192,902             3,751,258
Inventories, net                                                                            8,998,888             9,894,414
Prepaid expenses and other current assets                                                     975,918               553,689
Deferred income tax asset                                                                     743,364               743,364
-------------------    ------------------
18,032,681            16,951,880
PROPERTY AND EQUIPMENT, net                                                                 1,119,441               504,191
INTANGIBLE AND OTHER ASSETS:
Trademark license and trademarks (net of accumulated amortization
of $3,160,337 in 2000 and $2,995,285 in 1999)                                          10,607,872            10,768,493
Deposits and other assets                                                                     708,116               484,388
$       30,468,110     $      28,708,952
===================    ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings                                                              $          524,991     $               -
Accounts payable                                                                            5,204,072             5,936,873
Accrued liabilities                                                                           794,172               345,794
Accrued compensation                                                                          131,629               462,285
Current portion of long-term debt                                                             987,533               863,501
Income taxes payable                                                                          220,867               346,636
7,863,264             7,955,089
LONG-TERM DEBT, less current portion                                                          914,007               902,716
DEFERRED INCOME TAX LIABILITY                                                               1,225,271             1,225,271
SHAREHOLDERS' EQUITY:
Common stock - $.005 par value;  30,000,000  shares  authorized;  9,926,983  and
10,010,084 shares issued
and outstanding in 2000 and 1999, respectively                                             50,562                50,050
Additional paid-in capital                                                                 11,569,562            11,340,074
Retained earnings                                                                           9,575,942             7,235,752
Common stock in treasury, at cost - 185,375 and 0 shares
in 2000 and 1999, respectively                                                           (730,498)
Total shareholders' equity                                                             20,465,568            18,625,876
FOR THE THREE-MONTHS AND SIX-MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
Three Months Ended                      Six Months Ended
June 30,                               June 30,
-----------------------------------    ------------------------------------
2000                1999               2000                1999
----------------    ---------------    ----------------   -----------------
<S>                                                     <C>                  <C>                <C>                <C>
NET SALES                                                $    22,666,775     $   19,142,247     $    38,644,777    $     34,371,351
COST OF SALES                                                 11,974,847         10,161,707          20,748,889          17,983,133
GROSS PROFIT                                                  10,691,928          8,980,540          17,895,888          16,388,218
Selling, general and administrative                            7,793,226          6,481,186          13,746,638          12,252,432
Amortization of trademark license and trademarks                  82,638             74,148             165,297             148,296
Other expenses                                                                       15,000                                  30,000
Total operating expenses                              7,875,864          6,570,334          13,911,935          12,430,728
OPERATING INCOME                                               2,816,064          2,410,206           3,983,953           3,957,490
NONOPERATING EXPENSE (INCOME)
Interest and financing expense                                    63,891             40,080              92,186             103,111
Interest Income                                                   (1,306)           (23,864)             (8,550)            (50,023)
Net nonoperating expense                                 62,585             16,216              83,636              53,088
INCOME BEFORE PROVISION
FOR INCOME TAXES                                      2,753,479          2,393,990           3,900,317           3,904,402
PROVISION FOR INCOME TAXES                                     1,101,392            953,800           1,560,127           1,555,300
NET INCOME                                               $     1,652,087     $    1,440,190     $     2,340,190    $      2,349,102
================    ===================================   =================
NET INCOME PER COMMON SHARE:
Basic                                           $          0.17     $         0.14     $          0.23    $           0.24
================    ===============    ================   =================
Diluted                                         $          0.16     $         0.14     $          0.22    $           0.22
NUMBER OF COMMON SHARES USED
IN PER SHARE COMPUTATIONS:
Basic                                                 9,941,601          9,951,147           9,970,129           9,938,112
Diluted                                              10,367,602         10,638,447          10,426,526          10,567,539
FOR THE SIX-MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
2000                    1999
----                    ----
<S>                                                                    <C>                    <C>
Net income                                                             $    2,340,190         $    2,349,102
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of trademark license and trademarks                           160,621                148,297
Depreciation and other amortization                                        115,656                 72,761
Compensation expense related to issuance of stock options                                          48,684
Deferred income taxes                                                                             199,525
Effect on cash of changes in operating assets and liabilities:
Accounts receivable                                                   (3,441,644)            (2,983,299)
Inventories                                                              895,526             (1,291,444)
Prepaid expenses and other current assets                               (422,229)              (171,605)
Accounts payable                                                        (732,801)             3,193,893
Accrued liabilities                                                      448,378                (34,737)
Accrued compensation                                                    (330,656)              (161,102)
Income taxes payable                                                    (125,769)              (164,225)
---------------        ---------------
Net cash (used in) provided by operating activities                 (1,092,728)             1,205,850
Purchase of property and equipment                                           (736,138)               (96,374)
Increase in trademark license and trademarks                                    5,232
Decrease in note receivable from director                                                             20,861
Increase in deposits and other assets                                        (223,728)              (312,053)
Net cash used in investing activities                                 (954,634)              (387,566)
Increase in short-term borrowings                                             524,991
Principal payments on long-term debt                                         (353,085)            (1,753,735)
Increase in long-term debt                                                    488,408
Issuance of common stock                                                      230,000                 20,700
Redemption of common stock                                                   (730,498)
Net cash provided by (used in) financing activities                    159,816             (1,733,035)
NET DECREASE IN CASH                                                       (1,887,546)              (914,751)
CASH, beginning of period                                                   2,009,155              3,806,089
CASH, end of period                                                    $      121,609         $    2,891,338
===============        ===============
SUPPLEMENTAL INFORMATION Cash paid during the year for:
Interest                                                          $       87,286         $      117,508
Income taxes                                                      $    1,335,896         $    1,520,000
NONCASH TRANSACTIONS:
During the six-month  period ended June 30, 2000, the Company issued 15,127
shares of common stock to employees in connection  with a net exercise of
options to purchase 21,760 shares of common stock.
NOTES TO  CONSOLIDATED  FINANCIAL  STATEMENTS FOR THE SIX-MONTHS  ENDED JUNE 30,
2000 AND YEAR-ENDED DECEMBER 31, 1999
Reference  is made to the Notes to  Consolidated  Financial  Statements,  in the
Company's Form 10-K for the year ended December 31, 1999,  which is incorporated
by reference,  for a summary of significant  policies utilized by Hansen Natural
Corporation  ("Hansen"  or  "Company")  and its  subsidiaries,  Hansen  Beverage
Company ("HBC") and Hard e Beverage Company.  The information set forth in these
interim financial  statements is unaudited and may be subject to normal year-end
adjustments. The information reflects all adjustments, which include only normal
recurring adjustments,  which in the opinion of management are necessary to make
the financial  statements not misleading.  Results of operations covered by this
report may not  necessarily  be indicative of results of operations for the full
fiscal year.
2.       INVENTORIES
Inventories consist of the following at:
June 30,                  December 31,
2000                       1999
---------------------      ---------------------
Raw materials                       $ 3,640,096                 $3,615,269
Finished goods                        5,527,200                  6,442,193
9,167,296                 10,057,462
Less inventory reserves                (168,408)                  (163,048)
$ 8,998,888                 $9,894,414
=====================      =====================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
During  the three  months  ended June 30,  2000,  net sales were $22.7
million,  an  increase  of $3.5  million  or 18.4%  over net sales of $19.1
million for the three months ended June 30, 1999. The increase in net sales
during the three months ended June 30, 2000 was primarily  attributable  to
increased sales of the Company's  functional drinks, the Company's new line
of children's  multi-vitamin  juice drinks in 8.45-oz.  aseptic  packaging,
which was introduced in the third quarter of 1999,  and increased  sales of
Natural Sodas in cans. The increase in net sales was also attributable,  to
a lesser extent, to increased sales of apple juice and juice blends,  sales
of the Company's new line of premium functional Smoothies introduced in the
third  quarter of 1999,  and the  introduction  of Healthy  Start in 12-oz.
glass bottles in the first  quarter of 2000.  The increase in net sales was
partially  offset by decreased sales of Smoothies in glass and polyethylene
terephthalale  (P.E.T.)  plastic bottles,  Healthy Start in P.E.T.  plastic
bottles and Signature Sodas. Sales of Smoothies in cans and teas, lemonades
and juice cocktails were marginally lower.
The  Company  is  currently  in the  process  of  launching  a line of
functional  fruit  and  grain  energy  bars as  well  as a line of  gourmet
genetically modified organism-free (G.M.O. free) functional cereals.
During the three months ended June 30, 2000,  the gross profit margins
achieved  by the  Company  increased  to 47.2% from 45.1%  during the first
quarter of 2000.  For the six months ended June 30, 2000,  the gross profit
margin was 46.3%,  which was lower  than the gross  profit  margin of 47.7%
achieved by the Company for the six months ended June 30, 1999.
The Company is planning to introduce a malt based energy drink, called
Hard e, which  contains 5% alcohol,  during the third quarter of 2000.  The
Hard e product will not be marketed under the Hansen's name.
The  Company  continues  to  incur  expenditures  in  connection  with
development and introduction of new products and flavors.
During the three months ended June 30, 2000,  the Company  repurchased
36,200  shares of its common stock at an average  price of $3.88 per share.
During the six months  ended June 30,  2000,  the  Company  repurchased  an
aggregate  of  185,375  shares of its common  stock at an average  price of
$3.94 per share.
Results of Operations For The  Three-Months  Ended June 30, 2000 Compared to the
Three-Months Ended June 30, 1999
Net Sales.  For the three months  ended June 30, 2000,  net sales were
$22.7 million, an increase of $3.5 million or 18.4% over net sales of $19.1
partially  offset by  decreased  sales of  Smoothies  in glass  and  P.E.T.
plastic  bottles,  Healthy  Start in P.E.T.  plastic  bottles and Signature
Sodas.  Sales of Smoothies in cans and teas,  lemonades and juice cocktails
were marginally lower.
Gross  Profit.  Gross  profit was $10.7  million for the  three-months
ended June 30,  2000,  an increase  of $1.7  million or 19.1% over the $9.0
million gross profit for the three-months ended June 30, 1999. Gross profit
as a percentage of net sales increased to 47.2% for the three-months  ended
June 30,  2000 from 46.9% for the  three-months  ended June 30,  1999.  The
increase in gross profit and gross profit as a percentage  of net sales was
primarily  attributable to higher margins  achieved as a result of a change
in the Company's product mix.
Total Operating  Expenses.  Total operating expenses were $7.9 million
for the  three-months  ended June 30, 2000,  an increase of $1.3 million or
19.9% over total  operating  expenses of $6.6 million for the  three-months
ended June 30, 1999. Total operating  expenses as a percentage of net sales
increased to 34.7% for the three-months  ended June 30, 2000 from 34.3% for
the  three-months  ended June 30,  1999.  The  increase in total  operating
expenses  and total  operating  expenses as a  percentage  of net sales was
primarily  attributable to increased  selling,  general and  administrative
Selling, general and administrative expenses were $7.8 million for the
three-months ended June 30, 2000, an increase of $1.3 million or 20.2% over
selling,  general  and  administrative  expenses  of $6.5  million  for the
three-months  ended June 30,  1999.  Selling,  general  and  administrative
expenses  as  a  percentage  of  net  sales  increased  to  34.4%  for  the
three-months ended June 30, 2000 from 33.9% for the three-months ended June
30,  1999.  The  increase in selling  expenses  and  selling  expenses as a
percentage  of  net  sales  was  primarily  attributable  to  increases  in
distribution  (freight)  costs,  expenditures  for point of sale  items and
merchandise  displays,  and promotional  expenditures  and allowances.  The
increase  in  general   and   administrative   expenses   and  general  and
administrative  expenses  as  a  percentage  of  net  sales  was  primarily
attributable  to  increased  payroll  and other  costs in  connection  with
operating activities to support increased net sales.
Amortization  expense was $83,000 for the three-months  ended June 30,
2000, an increase of $9,000 or 11.5% over  amortization  expense of $74,000
for the three-months ended June 30, 1999.
Other expenses were $15,000 for the three-months ended June 30, 1999.
Operating   Income.   Operating   income  was  $2.8  million  for  the
three-months  ended June 30,  2000,  an  increase of $406,000 or 16.8% over
operating income of $2.4 million for the three- months ended June 30, 1999.
Operating  income as a percentage  of net sales  decreased to 12.4% for the
three-months  ended June 30,  2000 from 12.6% in the  comparable  period in
1999. The increase in operating income was attributable to the $1.7 million
increase in gross profit which was partially offset by the increase of $1.3
million in  operating  expenses.  The  decrease  in  operating  income as a
percentage  of net sales was  primarily  attributable  to the  increase  in
selling, general and administrative expenses as a percentage of net sales.
Net Nonoperating Expense. Net nonoperating expense was $63,000 for the
three-months  ended  June  30,  2000,  an  increase  of  $46,000  from  net
nonoperating  expense of $16,000 for the three-months  ended June 30, 1999.
Net  nonoperating  expense  consists of interest and financing  expense and
interest  income.  Interest  and  financing  expense  was  $64,000  for the
three-months  ended June 30, 2000 as compared to $40,000 for the comparable
period  in 1999.  The  increase  in  interest  and  financing  expense  was
primarily  attributable  to  interest  incurred on income  taxes.  Interest
income was $1,000 for the three-months  ended June 30, 2000, as compared to
interest  income of  $24,000  during  the  comparable  period in 1999.  The
decrease in interest income is attributable to a decrease in cash available
for investing in interest bearing securities.
Provision  for  Income  Taxes.  Provision  for  income  taxes was $1.1
million,  for the three-months ended June 30, 2000, an increase of $148,000
over the provision for income taxes of $954,000 for the  comparable  period
in 1999.  The effective tax rate for the  three-months  ended June 30, 2000
was 40.0% as  compared  to 39.8%  for the  comparable  period in 1999.  The
increase in provision for income taxes was  attributable to the increase in
income before  provision for income taxes and the increase in the effective
tax rate for the three-months ended June 30, 2000.
Net Income.  Net income was $1,652,000 for the three-months ended June
30, 2000,  compared to net income of $1,440,000 for the three-months  ended
June 30, 1999, an increase of $212,000 or 14.7%. The increase in net income
consists of an increase in operating income of $406,000 which was partially
offset by an increase in net interest and financing  expense of $46,000 and
a $148,000 increase in provision for income taxes.
Results of  Operations  For The  Six-months  Ended June 30, 2000 Compared to The
Six-months Ended June 30, 1999
Net Sales.  For the  six-months  ended June 30,  2000,  net sales were
approximately  $38.6 million, an increase of $4.3 million or 12.4% over the
$34.4  million  net sales  for the  six-months  ended  June 30,  1999.  The
increase in net sales was  primarily  attributable  to  increased  sales of
functional drinks, the introduction of the Company's new line of children's
multi-vitamin juice drinks in aseptic packaging which was introduced in the
third quarter of 1999, and increased  sales of Natural Sodas.  The increase
in net sales was also attributable, to a lesser extent, to the introduction
of Super Smoothies in cans in the third quarter of 1999, increased sales of
apple juice and juice  blends,  and the  introduction  of Healthy  Start in
12-ounce  bottles in the first  quarter of 2000.  The increase in net sales
was partially offset by decreased sales of Healthy Start in P.E.T. bottles,
Smoothies in glass bottles and P.E.T.  plastic  bottles,  Signature  Sodas,
Smoothies in cans and teas, lemonades and juice cocktails.
Gross Profit.  Gross profit was $17.9 million for the six-months ended
June 30, 2000,  an increase of $1.5 million or 9.2% over the $16.4  million
gross  profit for the  six-months  ended June 30,  1999.  Gross profit as a
percentage of net sales  decreased to 46.3% for the  six-months  ended June
30, 2000 from 47.7% for the six-months ended June 30, 1999. The increase in
gross  profit was  primarily  attributable  to  increased  net  sales.  The
decrease  in gross  profit  as a  percentage  of net  sales  was  primarily
attributable  to lower  margins  achieved  as a result  of a change  in the
Company's product mix.
Total Operating Expenses.  Total operating expenses were $13.9 million
for the  six-months  ended June 30,  2000,  an increase of $1.5  million or
11.9% over total  operating  expenses of $12.4  million for the  six-months
decreased  to 36.0% for the  six-months  ended June 30, 2000 from 36.2% for
the  six-months  ended  June 30,  1999.  The  increase  in total  operating
expenses  was  primarily  attributable  to increased  selling,  general and
administrative  expenses.  The  decrease in total  operating  expenses as a
percentage of net sales was primarily  attributable  to the  elimination of
other expenses for the six-months ended June 30, 2000.
Selling,  general and  administrative  expenses were $13.7 million for
the  six-months  ended June 30, 2000,  an increase of $1.4 million or 12.2%
over selling,  general and administrative expenses of $12.3 million for the
six-months  ended  June  30,  1999.  Selling,  general  and  administrative
expenses as a percentage of net sales remained  consistent at 35.6% for the
six-months  ended June 30, 2000 and for the comparable  period in 1999. The
increase in selling  expenses was  primarily  attributable  to increases in
distribution   (freight)  costs,   fees  paid  for  slotting,   promotional
allowances and  expenditures,  and expenditures for point of sale items and
merchandise displays. The increase in selling expenses was partially offset
by a decrease in expenditures for in-store demonstrations.  The increase in
general and administrative expenses was primarily attributable to increased
payroll and other costs in connection with operating  activities to support
increased net sales.
Amortization  expense was $165,000 for the  six-months  ended June 30,
2000, an increase of $17,000 or 11.5% over amortization expense of $148,000
for the six-months ended June 30, 1999.
Other expenses were $30,000 for the six-months ended June 30, 1999.
Operating  Income.  Operating income was $3,984,000 for the six-months
ended June 30, 2000, an increase of $27,000 or 0.7% over  operating  income
of $3,957,000 for the six-months ended June 30, 1999. Operating income as a
30,  2000 from 11.5% in the  comparable  period in 1999.  The  decrease  in
operating income as a percentage of net sales was primarily attributable to
the  reduction  in  gross  profit  as a  percentage  of net  sales  for the
six-months ended June 30, 2000.
six-months   ended  June  30,  2000,   an  increase  of  $31,000  from  net
nonoperating expense of $53,000 for the six-months ended June 30, 1999. Net
non-operating  expense  consists  of  interest  and  financing  expense and
six-months  ended June 30, 2000 as compared to $103,000 for the  comparable
period  in 1999.  The  decrease  in  interest  and  financing  expense  was
attributable  to the fact that the  principal  amounts  outstanding  on the
Company's term loan were lower in 2000 than during the comparable period in
1999.  Such  decrease was partially  offset by interest  incurred on income
taxes.  Interest income was $9,000 for the six-months  ended June 30, 2000,
as compared to interest  income of $50,000 during the comparable  period in
1999. The decrease in interest income is attributable to a decrease in cash
available for investing in interest bearing securities.
Provision for Income Taxes.  Provision for income taxes was $1,560,000
for the six months  ended June 30,  2000,  an  increase  of $5,000 over the
provision for income taxes of $1,555,000 for the comparable period in 1999.
The effective tax rate for the six-months  ended June 30, 2000 was 40.0% as
compared  to 39.8% for the  comparable  period  in 1999.  The  increase  in
provision  for income  taxes was  attributable  to the  increase  in income
before  provision  for income taxes and the increase in the  effective  tax
rate for the six-months ended June 30, 2000.
Net Income.  Net income was $2,340,000  for the six-months  ended June
30, 2000 compared to net income of $2,349,000 for the six-months ended June
30,  1999.  The $9,000  decrease  in net income  consists of an increase in
operating  income of 27,000  which was offset by an  increase of $31,000 in
net interest and financing  expenses and a $5,000 increase in provision for
income taxes.
As of June 30, 2000,  the Company had working  capital of  $10,169,000
compared to working  capital of  $8,997,000  as of December 31,  1999.  The
increase in working capital was primarily attributable to net income earned
after adjustments for certain noncash expenses,  primarily  amortization of
trademark  license and trademarks and depreciation and other  amortization.
The  increase in working  capital was also  attributable  to  increases  in
accounts receivable, prepaid expenses and other current assets as well as a
decrease in accounts  payable and  accrued  compensation.  The  increase in
working  capital was partially  offset by  repayments  made in reduction of
HBC's  term  loan,   decreases   in   inventories,   increases  in  accrued
liabilities, and acquisitions of property and equipment.
Net  cash  used  in  operating   activities  was  $1,093,000  for  the
six-months  ended  June  30,  2000 as  compared  to net  cash  provided  by
operating  activities of $1,206,000 for the comparable  period in 1999. The
increase  in  net  cash  used  in  operating   activities   was   primarily
attributable  to increases in operating  assets and  decreases in operating
liabilities  including  increases  in  accounts  receivable  and  increased
payments  on account of  accounts  payable.  The  increase  in cash used in
operating activities was partially offset by a decrease in inventories.
Net cash used in investing  activities was $955,000 for the six-months
ended June 30, 2000 as compared to net cash used in investing activities of
$388,000 for the  comparable  period in 1999. The increase in net cash used
in investing  activities was primarily  attributable  to the acquisition of
several vans and  promotional  vehicles as well as  increased  deposits and
other assets.
Net  cash  provided  by  financing  activities  was  $160,000  for the
six-months  ended June 30, 2000 as  compared to net cash used in  financing
activities of $1,733,000 for the comparable period in 1999. The increase in
net cash provided by financing  activities  was primarily  attributable  to
borrowings on the Company's  line of credit and capital leases entered into
to finance the acquisition of vans and promotional  vehicles.  The increase
in  cash  provided  by  financing   activities  was  partially   offset  by
repurchases  of the Company's  common stock and principal  payments made in
reduction of HBC's term loan.
Increases in accounts receivable,  acquisitions of inventory, property
and  equipment,  increases in deposits and other  assets,  repayment of the
Company's  long-term  debt,  repurchases of the Company's  common stock, as
well  as  HBC's   acquisition  and  development  plans  are,  and  for  the
foreseeable future are, expected to remain HBC's principle recurring use of
cash and working capital funds.  Management,  from time to time,  considers
the acquisition of capital  equipment,  particularly  coolers,  merchandise
displays,  vans  and  promotional  vehicles,   trademarks,  and  businesses
compatible  with  the  image  of  the  Hansen's(R)  brand  as  well  as the
development and  introduction of new product lines. The Company may require
additional  capital  resources for, or in connection  with, such activities
depending upon the cash requirements  relating thereto. Any such activities
will  also be  subject  to the  terms  and  restrictions  of  HBC's  credit
facilities.
As of June 30, 2000,  $982,000 was outstanding under the term loan, as
compared to  $1,332,000  outstanding  on December 31, 1999.  The  Company's
current  borrowing  rate on the term loan is the bank's base rate ("prime")
plus 1/2%.
HBC's  revolving line of credit has been renewed by its bank until May
1, 2002. The effective borrowing rate under the revolving line of credit is
prime plus 1/4%. HBC anticipates  that the revolving line of credit will be
renewed when it expires on May 1, 2002; however,  there can be no assurance
that it will in fact be  renewed  or,  if  renewed,  that the terms of such
renewal will not be disadvantageous to HBC and its business.
Management  believes  that  cash  generated  from  operations  and the
Company's cash resources and amounts  available  under HBC's revolving line
of credit,  will be sufficient to meet its operating cash  requirements  in
the foreseeable future,  including purchase  commitments for raw materials,
debt servicing, expansion and development needs as well as any purchases of
capital assets or equipment and repurchases of the Company's common stock.
Year 2000 Compliance
Prior to January 1, 2000,  the Company  reviewed the  readiness of its
computer  systems and business  practices  for  handling  Year 2000 issues.
These issues involve systems that are date sensitive and may not be able to
properly  process  the  transition  from year 1999 to year 2000 and beyond,
resulting in miscalculations  and software  failures.  Year 2000 compliance
updates  were  completed  in the fourth  quarter of 1999 and the  Company's
information  technology  ("IT")  and  non-information   technology  ("NIT")
computer systems completed the transition to the year 2000 without material
issues or problems.  No  additional  expenditures  to enable the Company to
become Year 2000 compliant are currently anticipated.  The Company has been
in contact with critical suppliers, co-packers,  customers, and other third
parties to  determine  the extent to which they may be  vulnerable  to Year
2000 issues.  The Company  cannot  currently  predict any future  effect of
third  parties'  Year 2000 issues.  However,  the Company has not been made
aware of any matter which would  materially  impact the Company's  business
from third parties.
Within  Europe,  The European  Economic and Monetary Union (the "EMU")
introduced a new currency,  the euro, on January 1, 1999.  The new currency
is in response to the EMU's  policy of economic  convergence  to  harmonize
trade policy,  eliminate  business costs associated with currency  exchange
and to promote the free flow of capital, goods and services.
On January 1, 1999, the  participating  countries  adopted the euro as
their local currency,  initially available for currency trading on currency
exchanges  and noncash  transactions  such as banking.  The existing  local
currencies, or legacy currencies,  will remain legal tender through January
1, 2002.  Beginning  on January 1, 2002,  euro-denominated  bills and coins
will be used for cash  transactions.  For a period of up to six-months from
this date, both legacy  currencies and the euro will be legal tender. On or
before July 1, 2002, the  participating  countries will withdraw all legacy
currencies and exclusively use the euro.
The  Company's  transactions  are  recorded  in U.S.  Dollars  and the
Company does not currently anticipate future transactions being recorded in
the euro.  Based on the lack of  transactions  recorded  in the  euro,  the
Company does not believe  that the euro will have a material  effect on the
financial position,  results of operations or cash flows of the Company. In
addition,  the  Company has not  incurred  and does not expect to incur any
significant costs from the continued  implementation of the euro, including
any currency risk,  which could materially  affect the Company's  business,
financial condition or results of operations.
The  Company  has  not   experienced   any   significant   operational
disruptions   to  date  and  does  not   currently   expect  the  continued
implementation   of  the  euro  to  cause   any   significant   operational
disruptions.
The  Private  Security  Litigation  Reform  Act of  1995  (the  "Act")
provides a safe harbor for forward looking  statements made by or on behalf
of the Company.  The Company and it's representatives may from time to time
make  written or oral  forward  looking  statements,  including  statements
contained in this report and other filings with the Securities and Exchange
Commission  and in  reports  to  shareholders  and  announcements.  Certain
statements  made in  this  report,  including  certain  statements  made in
management's  discussion  and  analysis,  may  constitute  forward  looking
statements  (within the meaning of Section 27.A of the  Securities Act 1933
as amended and Section  21.E of the  Securities  Exchange  Act of 1934,  as
amended) regarding the expectations of management with respect to revenues,
profitability, adequacy of funds from operations and the Company's existing
credit facility, among other things. All statements which address operating
performance,  events or developments that management expects or anticipates
will  or may  occur  in the  future  including  statements  related  to new
products,  volume growth, revenues,  profitability,  adequacy of funds from
operations,  and/or the Company's  existing credit  facility,  earnings per
share growth, statements expressing general optimism about future operating
results and  non-historical  Year 2000  information,  are  forward  looking
statements within the meaning of the Act.
Management  cautions that these  statements  are qualified by their terms and/or
important  factors,  many of which are outside  the control of the Company  that
could cause actual results and events to differ  materially  from the statements
made including, but not limited to, the following:
o    Company's  ability to  generate  sufficient  cash flows to support  capital
expansion plans and general operating activities;
o    Changes in consumer preferences;
o    Changes in demand that are weather related,  particular in areas outside of
California;
o    Competitive  products and pricing  pressures and the  Company's  ability to
gain or maintain  share of sales in the  marketplace as a result of actions
by competitors;
o    The introduction of new products;
o    Laws and  regulations,  and/or any changes  therein,  including  changes in
accounting standards,  taxation  requirements  (including tax rate changes,
new tax laws and revised tax law interpretations) and environmental laws as
well as the Federal  Food Drug and  Cosmetic  Act,  the Dietary  Supplement
Health and Education Act, and regulations  made thereunder or in connection
therewith,  especially those that may affect the way in which the Company's
products  are  marketed  as well as laws and  regulations  or rules made or
enforced by the Food and Drug Administration;
o    Changes in the cost and  availability  of raw  materials and the ability to
maintain favorable supply arrangements and relationships and procure timely
and/or adequate production of all or any of the Company's products;
o    The Company's ability to achieve earnings forecasts,  which may be based on
projected  volumes and sales of many  product  types  and/or new  products,
certain of which are more profitable than others. There can be no assurance
that the Company will achieve projected levels or mixes of product sales;
o    The Company's ability to penetrate new markets;
o    The marketing  efforts of distributors of the Company's  products,  most of
which  distribute  products that are  competitive  with the products of the
Company;
o    Unilateral  decisions by  distributors,  grocery  chains,  specialty  chain
stores, club stores and other customers to discontinue  carrying all or any
of the Company's products that they are carrying at any time;
o    The terms and/or  availability of the Company's  credit  facilities and the
actions of it's creditors;
o    The effectiveness of the Company's  advertising,  marketing and promotional
programs;
o    Adverse  weather  conditions,  which could reduce  demand for the Company's
o    The Company's  ability to make suitable  arrangements for the co-packing of
its  functional  drinks in 8.2-ounce  slim cans and Smoothies in 11.5-ounce
cans;
o    The Company's  customers',  co-packers' and suppliers'  ability to replace,
modify or upgrade  computer  programs in ways that adequately  address Year
2000 issues.  Given the numerous and  significant  uncertainties  involved,
there can be no assurance  regarding  their ability to identify and correct
all  relevant  computer  codes and imbedded  chips and other  unanticipated
difficulties or the ability of third parties to remediate their  respective
systems.
The foregoing list of important factors is not exhaustive.
The Company does not believe that  inflation has a significant  impact
on the Company's results of operations for the periods presented.
PART II - OTHER INFORMATION
Items 1 - 5.     Not Applicable
Item 6.          Exhibits and Reports on Form 8-K
(a)     Exhibits - See Exhibit Index
(b)     Reports on Form 8-K - None
Pursuant to the  requirements of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date:   August 9, 2000
/s/ Rodney C. Sacks
and Chief Executive Officer
/s/ Hilton H. Schlosberg
Vice Chairman of the Board,
President, Chief Operating Officer,
Chief Financial Officer and Secretary
Exhibit            10  (yyy)  Sixth  Modification  to  Revolving  Credit  Loan &
Security Agreement by and between Hansen Beverage Company and
Comerica Bank - California, dated May 23, 2000
Exhibit 10 (zzz)   Contract  Brewing  Agreement  by and  between  Hard e
Beverage Company and Rello, Inc. dated March 23, 2000
Exhibit 27         Financial Data Schedule
SIXTH MODIFICATION TO
REVOLVING CREDIT LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
This SIXTH  MODIFICATION  TO LOAN & SECURITY  AGREEMENT  AND INVENTORY
RIDER  (this  "Modification")  is  entered  into as of May 23,  2000 by and
between HANSEN BEVERAGE  COMPANY a Delaware  corporation  ("Borrower")  and
COMERICA BANK-CALIFORNIA, a California corporation ("Bank").
A.  Borrower  and Bank  have  previously  entered  into  that  certain
Revolving Credit Loan & Security  Agreement  (Accounts and Inventory) dated
as of May 15, 1997 (as modified, the "Loan Agreement"), together with those
certain documents entitled Inventory Rider (Revolving  Advance),  Equipment
Rider  and  Environmental  Rider,  all  dated as of May 15,  1997 and those
certain UCC-1 Financing Statements filed with various states.
B. In addition to the Collateral as defined in the Loan Agreement, the
obligations  of Borrower under the Loan Agreement are and were also secured
by  that  certain  Security   Agreement  in  License  Agreement  and  Other
Agreements dated May 15, 1997 (the "License Security Agreement").
C.  Hansen  Natural  Corporation  (sometimes  referred  to as  "Hansen
Natural"),  a  Delaware  corporation,  and CVI  Ventures,  Inc.  (sometimes
referred to as "CVI"),  a Delaware  corporation
(sometimes,  collectively,
"Guarantors") have each executed those certain Guaranties, each dated as of
May 15, 1997  (respectively,  the "Hansen Guaranty" and the "CVI Guaranty",
which  are   sometimes   hereinafter   collectively   referred  to  as  the
"Guaranties").  Pursuant  to  the  Guaranties,  Guarantors  guaranteed  the
obligations that are or may be owing to Bank by Borrower, as set forth more
completely in the Guaranties.
D. The Loan Agreement has been modified pursuant to that certain First
Modification to Revolving Credit Loan and Security Agreement  (Accounts and
Inventory) dated May 11, 1998 the "First Modification").
E. The Loan  Agreement  has been  further  modified  pursuant  to that
certain Second Modification to Revolving Credit Loan and Security Agreement
dated July 27, 1998 (the "Second Modification").
F. The Loan  Agreement  has been  further  modified  pursuant  to that
certain Third  Modification to Revolving Credit Loan and Security Agreement
dated December 1, 1998 (the "Third Modification").
G. In  conjunction  with  the  execution  of the  Third  Modification,
Borrower and Bank also entered into those certain  documents,  respectively
entitled  Inventory Rider (the "Inventory Rider") and addendum to Revolving
Credit Loan and Security Agreement, both also dated as of December 1, 1998.
H. The Loan  Agreement  has been  further  modified  pursuant  to that
certain Fourth Modification to Revolving Credit Loan and Security Agreement
dated March 28, 2000 (the "Fourth Modification").
I. The Loan  Agreement  has been  further  modified  pursuant  to that
certain Fifth  Modification to Revolving Credit Loan and Security Agreement
dated April 27, 2000 (the "Fifth Modification").
J. Pursuant to the Loan Agreement, Bank has made available to Borrower
a line of credit based on a formula (the "Formula  Based Line of Credit ').
The amount  available under the Formula Based Line of Credit was calculated
by the sum of (1) ninety  percent of the  Eligible  Accounts;  plus (2) the
Inventory  Sublimit  (as  defined  in  Recital  K below),  in an  aggregate
principal  amount not to exceed Three Million  Dollars  ($3,000,000) at any
one time, as further  provided in the terms and  conditions  set forth more
completely in the Loan Agreement
K.  Pursuant to the terms of the Inventory  Rider,  and as part of the
Formula  Based  Line of  Credit,  Bank has  provided  Borrower  with a loan
facility based on advances  against  Borrower's  Inventory (the  "Inventory
Sublimit"),  which was calculated based on fifty-five  percent (55%) of the
lower of the cost or the value of  Borrower's  Inventory,  but in any event
not to exceed  the  aggregate  sum of One  Million  Five  Hundred  Thousand
Dollars  ($1,500,000)  at any time,  as further  provided  in the terms and
conditions  set forth more  completely in the Inventory  Rider and the Loan
L. As of May 15, 2000, the principal balance of the Formula Based Line
of Credit was Five Hundred Ninety Five Thousand Dollars ($595,000).
M.  All of  the  documents  referred  to  above,  and  those  executed
therewith or thereafter, are sometimes hereinafter collectively referred to
as the "Loan Documents".
N. Borrower is a distributor  of natural soda and other  non-alcoholic
beverages.
0.  Borrower  and Bank have  agreed to modify  the Loan  Documents  in
certain respects, by, among other things, converting the Formula Based Line
of Credit  provided for in the Loan Agreement and the Inventory  Rider to a
non-formula based line of credit (the  "Non-Formula  Based Line of Credit")
on the terms and conditions set forth below.
For good  and  valuable  consideration,  receipt  of  which is  hereby
acknowledged, the parties agree as set forth below.
I.  Incorporation  by  Reference;   Definitions.  The  foregoing  Loan
Documents  and the Recitals are  incorporated  herein by this  reference as
though set forth in full herein. Any term not defined herein shall have the
meaning given in the Loan Documents.
2.  Modifications to the Loan Agreement.  The Loan Agreement is hereby
modified as set forth below.
2.1  Modification  of Section 2.1 of the Loan Agreement to Provide for
Conversion of the Formula Based Line of Credit to a Non-Formula  Based Line
of Credit. Section 2.1 of the Loan Agreement is hereby modified by deleting
it in its entirety and substituting the following provision:
"Notwithstanding any prior agreement to the contrary, upon the request
of Borrower, made at any time and from time to time during the term hereof,
and so long as no Event of Default has occurred,  and  irrespective  of any
Borrowing Base defined herein, Bank shall lend to Borrower an amount not to
exceed the principal sum of Three Million  Dollars  ($3,000,000) at any one
time,  with any amount in 'excess  thereof being referred to hereinafter as
an 'Overadvance')."
2.2  Modification  of the First  Sentence  of Section  3.1 of the Loan
Agreement.  The first  sentence  of Section  3.1 of the Loan  Agreement  is
hereby  modified  by  deleting  it in its  entirety  and  substituting  the
following provision:
"This  Agreement  shall  remain in full force and effect  until May 1,
2002, unless earlier terminated by Borrower."
2.3  Modification  of  Section  6.15  (c) of  the  Loan  Agreement  to
Eliminate  Certain  Reporting  Requirements.  Section  6.15 (c) of the Loan
Agreement is hereby  modified by deleting it in its entirety and  replacing
it with the following provision:
"Notwithstanding  any prior agreement to the contrary,  Borrower shall
not be under any obligation to provide Bank with the following reports:
(1) Accounts receivable or payable aging reports;
(2)      Inventory reports; and
(3)      Borrowing Base reports."
2.4  Modification  of the Loan  Agreement  to Add New Section  6.25 to
Eliminate  Required Audits Absent An Event of Default or Default.  The Loan
Agreement is hereby modified to add the following provision as Section 6.25
of the Loan Agreement:
"Notwithstanding  any  prior  agreement  to  the  contrary,  the  Loan
Agreement and in particular Section 6.1 are hereby modified to provide that
absent the  occurrence  of an event of  default  or default  under the Loan
Documents  which  is  continuing,  Bank  shall  not  require  that  Bank be
permitted to conduct  audits of the  Accounts or Inventory of Borrower.  In
the event of the  occurrence  of an Event of Default or Default by Borrower
under the Loan Documents,  Bank shall be entitled to conduct such audits of
Borrower's  Accounts and  Inventory  as Bank  reasonably  may  require,  at
Borrower's expense."
3. Deletion of the Inventory  Rider. In light of the conversion of the
Formula Based Line of Credit to a Non-Formula Based Line of Credit pursuant
to this  Modification,  the  Inventory  Rider is hereby  deleted  and is no
longer an operative document between Bank and Borrower.
4. No  Modification  of Other  Obligations;  No Effect on  Collateral.
Except as is  otherwise  specifically  set forth  herein or in any document
executed in connection herewith,  the Loan Agreement and the Loan Documents
are and shall  remain  unmodified  and in full  force and  effect,  and are
hereby ratified and confirmed.  Nothing herein shall be deemed to affect in
anyway the Collateral that secures the obligations under the Loan Agreement
(as modified by this  Modification)  or under any other agreement now or in
5.  Conflicts.  If any conflict  exists  between the provisions of the
Loan Documents and the provisions of this  Modification,  the provisions of
this Modification shall control.
6. Ratification of the Guaranties and Security Therefor.  By executing
this Modification below where indicated,  Guarantors  acknowledge and agree
that they have read and are familiar with, and consent to, all of the terms
and  conditions  of  this  Modification.  In  light  of the  foregoing,  by
executing this Modification,  Guarantors further confirm and agree that all
of the terms and provisions of the Guaranties are ratified and  reaffirmed,
and that the  Guaranties  shall and do  continue  in full force and effect.
Although Bank has informed  Guarantors  of the terms of this  Modification,
Guarantors  understand and agree that Bank has no duty whatsoever to do so,
nor to seek this or any future  acknowledgment,  consent, or reaffirmation,
and that nothing  contained herein is intended to, or shall create,  such a
duty on the part of Bank as to any transactions hereafter.
7: Further  Assurances  Borrower agrees to make and execute such other
Documents  and/or  take such  other  action  and/or  provide  such  further
assurances as may be requested by Bank in connection  with the  Obligations
or as may be necessary or required to effectuate  the terms and  conditions
of this Modification and any documents executed in connection herewith.
8. Future  Modifications.  Neither Us  Modification  nor any  document
executed  herein  entitles,  or implies  any consent or  agreement  to, any
further or future modification of, amendment to, waiver of, or consent with
respect to any provision of the  Modification  or the Loan  Documents.  Any
modifications  hereto  or to the Loan  Documents  shall be in  writing  and
signed by the parties.
9.  Integration.  This  Modification  and any  documents  executed  in
connection   herewith  are   integrated   agreements,   and  supersede  all
negotiations  and  agreements  regarding  the  subject  matter  hereof  and
thereof,  and taken  together  with the Loan  Documents  and any  documents
executed in  connection  herewith,  constitute  the final  agreement of the
parties with respect to the subject matter hereof and thereof.
IN WITNESS  WHEREOF,  the parties have caused this  Modification to be
executed as of the day and year first written above.
HANSEN BEVERAGE COMPANY
By: /s/ Rodney Sacks
Title: Chairman
COMERICA BANK-CALIFORNIA
By:  /s/ James Bradley
By: James Bradley
Its: Vice President
CONSENT OF GUARANTORS:
Hard E Beverage Co. formerly
CVI Ventures, Inc.
Its: Chairman
CONTRACT BREWING AGREEMENT
This Contract  Agreement  ("Agreement") is made this 23rd day of March
2000, by and between Rello,  Inc. d/b/a Gluek Brewing  Company,  a Colorado
corporation,  with its  principal  place of business at 219 North Red River
Avenue, Cold Spring,  Minnesota 56320 ("Brewer") and Hard Energy Company, a
corporation, with its principal place of business at 2380 Railroad Street,
Suite 101, Corona, California 92880 ("Company").
WHEREAS,  Brewer is engaged in the  business  of  brewing,  packaging,
marketing and distributing  malt beverages in the United States,  including
the District of Columbia.
WHEREAS, Company owns, controls or possesses certain recipes, formulae
and/or  specifications  for  beverage  products as well as the right to use
certain  names,  design,  slogans,  logos or  logotypes  as brand  names in
conjunction therewith; and
WHEREAS,  Company  desires to have certain of such  beverage  products
brewed, packaged,  marketed and distributed by Brewer under the brand names
identified below and Brewer desires to do so.
NOW,  THEREFORE,  in  consideration  of the promises and covenants set
forth   herein,   the  adequacy  and   sufficiency   of  which  are  hereby
acknowledged, the parties, in good faith, agree as follows:
1. GRANT.
Company hereby grants, and Brewer hereby accepts, the right
and license to brew,  package,  label and distribute malt beverage products
under the  brand  name  "HARD  ENERGY"  ("the  Trademark"),  such  products
hereinafter referred to as "the Products", for which Company owns, controls
or  possesses  all  recipes,  formulae,  specifications,   names,  designs,
slogans,  logos and  logotypes in the fifty states of the United States and
the- District of Columbia (the "Territory").
2. TERM This  Agreement  shall become  effective  and binding upon the
parties on the date set forth above and shall remain in effect for a period
of twenty (20) months from such date, unless earlier terminated as provided
herein ("the Initial Term"). Either party shall be entitled,  not less than
ninety  (90) days prior to the  expiration  of the  Initial  Term,  to give
notice  to  the  other  of the  termination  of  this  agreement  upon  the
expiration of the Initial Term. In the absence of such written  notice from
either party to the other  terminating  this Agreement on the expiration of
the Initial Term,  this Agreement  shall continue  indefinitely  thereafter
subject to the right to either  party to  terminate  this  Agreement at any
time,  without cause,  upon the giving to the other of not less than ninety
(90) days notice of such  termination,  and, in such event,  this Agreement
shall be terminated on the date specified in such notice.
3. DUTIES OF COMPANY.
a. Proprietary Information. Company shall provide Brewer with recipes,
formulae and  specifications for the Products as well as the Product flavor
profiles,  packaging  materials and instructions and such other information
and materials as are required  under the terms of this  Agreement or as may
be  reasonable  and  necessary  for  Brewer  to carry out the terms of this
Agreement (the "Proprietary Information").
b. Product Orders and Shipments.  Brewer shall produce the Products in
quantities  sufficient  to meet the needs of  customers  in the  Territory,
provided  that it is furnished  with a written firm order for Products (the
"Order") not less than thirty (30) days in advance of the requested Product
packaging date (the  "Requested  Packaging  Date") which Orders shall be in
writing  and  addressed  to  Brewer  at P.O.  Box 476,  219 North Red River
Avenue,  Cold  Spring,   Minnesota  56320,   Attention:   Order  Processing
Department;  fax number (320) 685-8313. Each Order shall state the quantity
of each Product to be brewed and packaged and shall  provide  detailed pack
aging instructions,  including but not limited to, specific instructions in
regard to any packaging requirements.  Brewer shall not be required to brew
and package less than 1500 cases (24 packs) with respect to any  individual
c.  Packaging  Materials.  Company  will provide  packaging  materials
(labels,  crowns,  6-pack  carriers,  mother cartons and cans) to Brewer no
later  than ten (10) days prior to the  Requested  Packaging  Date,  all of
which packaging  materials shall be suitable for use in Brewer's  packaging
equipment.  Brewer and Company  will  cooperate in the  purchasing  of such
Packaging  Materials  so as to achieve  the best  possible  prices.  If the
packaging Materials are not received as required herein,  Brewer shall have
no  obligation  to have the Products  ready for  packaging on the Requested
Packaging  Date  and  Brewer  and  Company  shall  mutually  agree on a new
packaging date for the Products.  Upon the  termination of this  Agreement,
all  packaging  materials in Brewer's  possession  relating to the Products
shall be  shipped  to Company at  Company's  sole  expense.  Alternatively,
Company  can prepay the cost of such  packaging  materials  and Brewer will
obtain same.
d. State Taxes and Recycling Fees.  Company shall reimburse Brewer for
any sales taxes aid recycling fees required by state government regulations
and which have been paid by Brewer.
4.         DUTIES OF BREWER.
a. Brewing and  Packaging  of Products.  Brewer shall brew and package
the Products  according to  Company's  instructions/specifications.  Brewer
possesses certain proprietary recipes,  formulas,  procedures and processes
for production of clear malt,  which shall be made available to the Company
as part of this contractual agreement.
b. Sample Analysis of Products.  If required by the Bureau of Alcohol,
Tobacco  and  Firearms   ("BATF")  and/or  any  state  alcoholic   beverage
regulatory  authority,  Brewer shall provide an  appropriate  sample of the
Products for analysis.  All costs  associated with such,  federal and state
Product analysis shall be borne by the Company.
c. Label  Approvals.  Brewer shall obtain a BATF  Certificate of Label
Approval  as  well  as  the  appropriate   state  label  approvals   and/or
registrations  for each of the  Products'  labels.  All costs  incurred  in
obtaining  such  label  approval  and/or  registration  shall  be  borne by
Company.  Brewer  agrees to sell the  Products in those states in which the
Brewer is  currently  licensed  and in those  other  states  which  Company
requests.  If Brewer is not  licensed to sell the  Products in any state in
which Company requests it to sell the Products,  Brewer undertakes,  at its
cost, to apply for and obtain the necessary  license(s) within a reasonable
period of time after request therefor by the Company.
d.  Delivery of Products.  Brewer shall arrange for the Products to be
delivered to licensed distributors in the Territory approved of by Company.
Company shall  reimburse  Brewer for the cost of  delivering  the Products.
Brewer  shall not sell any  Products  to any  person or entity  within  the
Territory  which  Brewer  knows or has  reason to know  intends to sell the
Products outside the Territory.
e.  Brewer  will  invoice  sales of Products in all states to licensed
distributors  appointed by Brewer, all of whom shall be subject to approval
by Company.  Each of the distributors  will be required to make payment for
all Products purchased from Brewer by way of electronic transfer,  whenever
possible, or by check, within 30 days from date of invoice, or such shorter
period as may be  prescribed  by law in the states  concerned,  and will be
subject to such credit  limits as may be set by Brewer  after  consultation
with the  Company.  In respect  of-all  sales of Products in excess of such
approved  credit  limits,  distributors  will be required  to make  payment
therefor to Brewer  prior to shipping of Products by Brewer.  Brewer  shall
provide the necessary  administrative services and assistance to manage and
administer  the  invoicing  of all  sales of the  Products,  collection  of
receivables,  and reconciliation of payments therefor from distributors and
Brewer will provide Company with an accounting  thereof not less frequently
than once a month.  Brewer  shall open a separate  bank account in its name
with First National Bank of Cold Spring,  Minnesota.  All payments received
from distributors of the Products shall be electronically  transferred into
such bank account and/or deposited directly into such account,  immediately
upon receipt thereof by Brewer. At the end of each business day, the amount
standing  to  the  credit  of  Brewer  in  such  bank   account   shall  be
automatically  transferred  from such bank  account,  by way of a  standing
instruction,  to a separate bank account that will be opened and maintained
by the Company in its own name, at the same bank.  The Company shall be and
remain  the sole  owner  of such  bank  Account  and all  monies  deposited
therein.  The separate bank account opened by the Brewer in accordance with
this paragraph shall not be used for any purpose, other than the receipt of
payments as  contemplated  above and payment  over of such  payments to the
Company as contemplated above. Bank statements reflecting deposits into and
transfers  between  Brewer's and  Company's  separate bank account shall be
provided to the Company not less frequently than once a week.
f.  Brewer's  obligation  to receive and.  transfer all payments  from
distributors of the Products pursuant to paragraph 4(e) above, shall not be
subject to right of  set-off,  counterclaim,  recoupment,  defense or other
right which the Brewer may have against the Company.
g. All distribution agreements and/or appointments of distributors for
the sale of Products  within the Territory shall be subject to the approval
of the Company, notwithstanding that such agreements and appointments shall
be  concluded  by the  Brewer in its own name.  Each such  agreement  shall
include a provision that Brewer may assign its interests  thereunder.  Upon
the   termination  of  this  Agreement,   all  distributor   contracts  and
appointments  shall be assigned  by Brewer to the Company  and/or any other
party nominated by the Company,  to the extent permitted by law. The Brewer
undertakes  to execute any  instruments  or documents  that the Company may
require in order to give effect to such assignments.
5.  INSURANCE.  Brewer and  Company  shall each,  at its own  expense,
obtain and maintain a adequate product liability  insurance during the term
of the Agreement, and an) extension hereof (collectively referred to as the
"Policy"),  in an amount not less than One Million Dollars  ($1,000,000.00)
per incident and One Million Dollars ($1,000,00(.00) in the aggregate. Each
party shall  provide the other with a certificate  of insurance  evidencing
the  existence  of the Policy no later than  fifteen (15) days prior to the
fir3t Requested Ship Date and the Policy shall provide that the other party
shall be given  notice  by said  insurance  company  at least ten (10) days
prior to the cancellation of expiration of the Policy.
Brewer shall  procure and  maintain in full force and effect  workmans
compensation,  public liability bodily injury and public liability property
damage insurance policies wit a limits customary in the trade. Brewer shall
add Company to such  policies as an additional  insured as  applicable  and
Brewer shall provide company with proof of such insurance annually.
6. PRICE AND PAYMENT.
a. During the term of this  agreement  Brewer shall charge Company the
price  set  forth on  EXHIBIT A  ("Price").  The  Price is F.O.B.  Brewer's
warehouse  dock and  includes  applicable  Federal  Excise Tax and  certain
packaging  materials,  as more fully described on EXHIBIT A. The Price does
not include any state sales tax or recycling fees.
b.  Brewer  shall  invoice  Company  for the  Products on the date the
Products shipped, or if Product has been in Brewer's warehouse for at least
fifteen  (15)  days  following  the date the  Products  are  packaged  (the
"Packaging  Date").  All payments  are due fifteen (15) days from  Brewer's
invoice on all  shipments  or  nonshipped  invoices  per  paragraph  6c. If
Company has not tendered  payment  thirty (30) days from Brewer's  invoice,
Brewer may charge Company  interest on the due amount from the thirty-first
(31st) day from  Brewer's  invoice  until such payment is made at a rate of
10% per annum. Brewer's right to charge such interest is not in lieu of any
other right Brewer may have against Company for breach of this agreement.
c. Company is  responsible  for the cost of  warehousing  any Products
that have not been shipped within sixty (60) days of the Packaging Date. In
the event that any Products are, for any reason,  still being warehoused by
Brewer sixty (60) days after the Packaging  Date,  Brewer shall be entitled
to levy a warehousing and handling  surcharge of _________  ($___) per case
per month to Company for so long as such Products are stored by Brewer (the
"Warehousing  Charge").  The Warehousing Charge shall accrue in full on the
sixty-first  (61st) day after the  Production  Date and on the first day of
each month  thereafter,  and shall be prorated for partial  months.  If the
Products are not shipped within one hundred and twenty (120) days after the
Packaging Date,  Brewer may, after the expiration of thirty (30) days after
written  notice to Company,  sell or dispose of such  Products at Company's
sole expense. Proceeds from the sale of the Products will be applied to the
Company's  outstanding  balance due, but Company will remain liable for any
outstanding balance due after such application of sales proceeds.
7.          REPRESENTATIONS AND WARRANTIES.
a. Company represents, warrants and covenants to Brewer that:
(i) it will assist Brewer in obtaining the necessary federal and state
label  approval,  and  registrations  for the  Products,  and shall provide
Brewer with copies of all federal and state label  approvals,  if any, held
by Company for the Products prior to shipment, and
(ii) it is the legal  owner or holder of all rights to the  Trademark,
any and all trademarks and copyrights associated with the Products, whether
registered,  pending or common law,  including but not limited to the brand
names of the Products, Company's name used in connection with the Products,
and all other names, designs,  slogans, logos or logotypes used to identify
the' Products (collectively  referred to as the "Trademarks"),  an that the
Trademarks  do not, to the best of Company's  knowledge,  infringe upon any
copyrights,  patents,  trademarks, trade dress, or other property rights of
any person, firm or entity.
b. Brewer represents warrants and covenants to Company that:
(i) it  currently  has,  and shall  maintain  during  the term of this
Agreement,  a  Brewer's  Notice  issued  by the  BATF as well as all  other
licenses,  permits,  registrations  and  certificates  of  approval  as are
necessary to brew,  package and  distribute  the Products in the Territory.
Brewer  currently holds state licenses  authorizing it to sell the Products
in the states set forth on Exhibit B.
(ii) all  Products  will be brewed and  packaged  in  accordance  with
Company's specifications. Company may inspect Brewer's records or processes
used in production of the Products upon request.
(iii) it will follow good manufacturing practices in the production of
the Products and; all Products shall be of a good and merchantable  quality
and fit for the purpose for which they are intended to be used.
(iv) the production,  packaging,  distribution  and marketing by it of
the Products,  pursuant to the terms and conditions of this Agreement,  are
in accordance  with all applicable  laws and  regulations  dealing with the
production,  storage,  distribution and sale of Products containing alcohol
and/or malts.
9  TRADEMARKS  Brewer  recognizes  the  great  value  of the  goodwill
associated with the Trademarks and acknowledges that the Trademarks and all
accompanying  rights therein,  and the goodwill  attached  thereto,  belong
exclusively  to the  Company.  Brewer  shall  not,  during the term of this
agreement or thereafter, assert any right of ownership of the Trademarks or
use the  Trademarks  other  than in  accordance  with  the  terms  of to is
agreement, or disparage or diminish the image and quality of the Trademarks
among the public.  Brewer shall  cooperate  with Company in preserving  and
protecting Company's rights in and to the Trademarks.
10.  RELATIONSHIP  OF  THE  PARTIES.   The  parties  shall  be  deemed
independent  contractors.  Nothing herein  contained  shall be construed to
create any partnership,  joint venture,  agency or employment  relationship
between the  parties.  Neither  party shall have the power or right to bind
the other party to any third  party,  and each party  shall be  responsible
exclusively for its own taxes and expenses related to doing business.
11.  INDEMNIFICATION.  If any  demand,  claim  or  action  is  made or
threatened   against   Brewer  for  (a)  trademark   infringement,   unfair
competition  or  interference  with a contract to which Company is a party,
asserted  as a result of Brewer's  lawful  performance  of its  obligations
under the terms of this  Agreement,  or (b)  violation  of Federal or State
alcohol laws and regulations  due to marketing  practices of the Company in
respect of the Products,  Company  shall defend,  indemnify and hold Brewer
harmless from any loss, damage, liability, or expense, including reasonable
attorneys  fees,  for which Brewer may be liable and pay in response to any
such demand,  claim or action,  including  but not limited to Brewer's cost
for any products that must be destroyed, recalled or otherwise not saleable
as a result of the  resolution of any such demand and claim or action,  and
Brewer's  cost for packaging  materials  and labels for any such  materials
that must be  destroyed,  recalled or are otherwise not useable as a result
of any such demand,  claim or action. If Company should fail or refuse, for
any reason, to defend,  indemnify, or seek to preserve for Brewer the right
to use the Trademarks,  as provided herein, Brewer shall have the right but
shall not the obligation to defend against any such demand,  claim in place
of  Company.  If  Brewer  does  undertake  to defend  against  a  trademark
Infringement claim, or to otherwise preserve and protect the rights granted
herein to use the  Trademarks,  Brewer shall have the right to collect from
Company by way of separate  action,  any and all amounts expended by Brewer
in  connection  with  such,  action  including  but not  limited to actual,
direct,  out-of-pocket costs and expense of investigation,  litigation, and
all its reasonable  outside  attorneys fees directly related to such claim,
provided,  that Company shall,  under no  circumstances,  be liable for any
loss, damage, liability or expense resulting from the negligence or willful
or reckless misconduct of Brewer, its employees, agents or representatives.
Brewer agrees to defend,  indemnify and hold Company  harmless  against
any and all  claims,  costs,  expenses,  losses,  causes  of  action  (including
reasonable  attorneys fees and costs),  damages or liabilities on account of the
death and/or injury to any  person(s) or damage to any property  arising out of,
due to, or in any way connected with (a) Brewer's failure to produce and package
the  Products  in  accordance  with  the   Proprietary   Information  and  other
specifications and processes  provided to Brewer by Company,  and/or b) any act,
omission or failure to act by Brewer, its employees,  agents or representatives.
which act,  omission or failure to act is in violation  of Brewer's  obligations
under this  Agreement  and/or (c) any violation of Federal or State alcohol laws
and regulations by Brewer or due to any act or omission of the Brewer in respect
of the Products.
12. TERMINATION.  Notwithstanding anything else herein to the contrary,
either party may, at anytime,  terminate this Agreement, with cause, upon thirty
(30)  days  prior  written  notice  to  the  other  party.  The  warranties  and
representations   set  forth  herein  shall  survive  the  termination  of  this
Agreement.  Cause must be a serious breach and not corrected after  notification
during the thirty  (30) day  period.  If there is an  inability  to agree on any
major issue, it must be submitted to arbitration.
13.   CONFIDENTIALITY.    All   Proprietary   Information,    material,
information,  data or records  (the  "Materials")  provided  by one party to the
other  shall be the sole and  exclusive  property  of the party  providing  such
Materials.  The parties agree that any information that may be received from the
other party,  including but not limited to,  Proprietary  Information,  customer
lists,  product  recipes,  formulae,  specifications  and  pricing  information,
promotional or marketing materials,  or the like in connection with the Products
or this  Agreement or the rights and  obligations  provided for  hereunder  (the
"Confidential  Information"),  shall not be disclosed by such party to any other
person and is only to be used in the performance of the  obligations  under this
Agreement and for no other reason.  Each party shall return the original and all
copies of the Materials  and  Confidential  Information  received from the other
party promptly following the termination of this Agreement.
In the event of any  breach of this  provision  by  either  party,  the
injured party may obtain an injunction  against the other party's  disclosure of
the  data  and  shall be  entitled  to any  damage  or loss  occasioned  by such
disclosure.  This application of confidentiality  and  non-disclosure  shall not
apply  to  information  which  (a) is in the  public  domain  at the time of the
receipt  from the other  party,  or which comes into the public  domain  without
breach of an obligation hereunder;  (b) is known and can be shown to be known by
one party at the time of receipt from the other party;  or (c) becomes  known to
one party through a third source whose  acquisition was independent of the other
party and not in breach of any obligation hereunder.
a. Entire Agreement.  This Agreement and the exhibits referred
to herein and to be delivered  pursuant hereto,  constitute the entire agreement
between the parties  pertaining to the subject matter hereof,  and supersede all
prior agreements,  understandings,  negotiations and discussions of the parties,
whether oral or written,  and there are no warranties,  representations or other
agreements  between the parties in connection  with the subject  matter  hereof,
except as specifically set forth herein.
b.  Severability.  If any term or provision of this  Agreement
shall,  to any  extent,  be  determined  to be  invalid  or  unenforceable,  the
remainder of this Agreement  shall not be affected  thereby,  and each remaining
term and  provision  of this  Agreement  shall be valid and  enforceable  to the
greatest extent permitted by law.
c. Captions.  The captions and paragraph  numbers appearing in
this Agreement are inserted as a matter of convenience only and shall not in any
way limit, amplify or otherwise affect the term of provisions hereof.
d. Governing Law and Venue.  This Agreement shall be construed
and  interpreted  according to the laws of the State of  California  and Company
agrees that it is subject to personal jurisdiction in California.
e.  Arbitration.  Any  dispute  hereunder  shall be settled by
arbitration  in Los  Angeles  Court,  California  pursuant  to the  rules,  then
obtaining, of the American Arbitration Association.
f.  Attorneys'  Fees.  If  either  party  brings  an action to
enforce  this  Agreement,  or  to  declare  rights  under  this  Agreement,  the
prevailing  party  in any  such  action  shall  be  entitled  to its  reasonable
attorneys' fees to be paid by the losing party.
g. Assignment. Either party may assign this Agreement, subject
to all of the terms and  provisions  hereof  and to the  written  consent of the
non-assigning party, which may bc withheld by the Company in its sole discretion
but may not be  unreasonably  withheld by the  Brewer.  All  provisions  of this
Agreement shall be binding upon the respective employees, delegates, successors,
heirs and permitted assignees of the parties.
h. Notices.  Unless otherwise  specifically provided herein,
all  communications  or notices required or permitted by this Agreement shall be
in  writing  and shall be deemed to have been  given at the  earlier of the date
when  actually  delivered to an officer of the other or three days after deposit
in the United States mail, certified or registered mail, postage prepaid, return
receipt  requested,  and  addressed  as follows,  unless and until  either party
notifies the other of a change of address:
If to Brewer: Rello, Inc. d/b/a Gluek Brewing Company
219 North Red River Avenue
Cold Spring, Minnesota 56320
Attention: Order Processing Department
Fax# (320) 685-8318
If to Company:
Hansen's Beverage Company
2380 Railroad Street, Suite 101
Corona, California 92880
I. Waiver and  Modifications.  Unless  otherwise  specifically
provided herein, no waiver or modification of any of the terms of this Agreement
shall be valid'  unless in  writing  and  signed by both  parties.  No waiver by
either party of a breach hereof or default hereunder shall be deemed a waiver by
such party of a prior or subsequent breach or default of like or similar nature.
j . Force Majeure. In the event that either party is prevented
or delayed from performing its obligations  under the terms of this Agreement by
virtue of one or More events or  contingencies  beyond its  reasonable  control,
whether or not presently  occurring or contemplated  by either party,  including
but not limited to, fires, labor strikes, labor disputes,  accidents,  sabotage,
federal or state legislation or any regulations or orders  thereunder,  judicial
action,  acts of God,  war, or civil  commotion,  such  nonperformance  shall be
excused and shall not  constitute a default  under the terms of this  Agreement,
provided,  however,  that in the event that such nonperformance  continues for a
period in excess of three (3)  consecutive  months,  either party shall have the
option thereunder to terminate this Agreement immediately upon written notice to
that effect.
k. Further Instruments.  The parties shall execute and deliver
any and all other instruments and shall take any and all other actions as may be
reasonably  necessary to carry out the intent of the  Agreement  into full force
and effect.
l Counterparts.  This Agreement may be executed in one or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.
IN  WITNESS  WHEREOF,   the  undersigned  parties  have  executed  this
Agreement as of the day and year first above written.
RELLO, INC. d/b/a GLUEK BREWING COMPANY
By: /s/Maurice Bryan
Name:     Maurice Bryan
Title:        President
HARD ENERGY COMPANY
By: /s/Rodney Sacks
Name:       Rodney Sacks
Title:          Chairman
EXHIBIT "B",
STATES IN WHICH BREWER LICENSED
ALASKA                                               WASHINGTON
ARIZONA                                              WISCONSIN
NEWMEXIC0
<TABLE> <S> <C>
<ARTICLE>                     5
<LEGEND>
THIS  SCHEDULE  CONTAINS  SUMMARY  FINANCIAL   INFORMATION  EXTRACTED  FROM  THE
CONSOLIDATED  BALANCE SHEETS AND CONSOLIDATED  STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE  COMPANY'S  FORM 10-Q FOR THE QUARTER,  AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S>                                            <C>
<PERIOD-TYPE>                                        3-MOS
<FISCAL-YEAR-END>                              DEC-31-2000
<PERIOD-START>                                 MAR-01-2000
<PERIOD-END>                                   JUN-30-2000
<CASH>                                             121,609
<SECURITIES>                                             0
<RECEIVABLES>                                    9,739,866
<ALLOWANCES>                                     2,546,964
<INVENTORY>                                      8,998,888
<CURRENT-ASSETS>                                18,032,681
<PP&E>                                           2,102,287
<DEPRECIATION>                                     982,846
<TOTAL-ASSETS>                                  30,468,110
<CURRENT-LIABILITIES>                            7,863,264
<BONDS>                                                  0
<PREFERRED-MANDATORY>                                    0
<PREFERRED>                                              0
<COMMON>                                            50,562
<OTHER-SE>                                      20,415,006
<TOTAL-LIABILITY-AND-EQUITY>                    30,468,110
<SALES>                                         22,666,775
<TOTAL-REVENUES>                                22,668,081
<CGS>                                           11,974,847
<TOTAL-COSTS>                                    7,875,864
<OTHER-EXPENSES>                                         0
<LOSS-PROVISION>                                         0
<INTEREST-EXPENSE>                                  63,891
<INCOME-PRETAX>                                  2,753,479
<INCOME-TAX>                                     1,101,392
<INCOME-CONTINUING>                              1,652,087
<DISCONTINUED>                                           0
<EXTRAORDINARY>                                          0
<CHANGES>                                                0
<NET-INCOME>                                     1,652,087
<EPS-BASIC>                                          .17
<EPS-DILUTED>                                          .16