<PAGE>

                                   FORM 10-Q

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

              Quarterly Report Pursuant to Section 13 or 15(d) of
                    the Securities and Exchange Act of 1934

   For the quarterly period ended: 04/30/02 Commission file number: 1-14091

                             SHERWOOD BRANDS, INC.

            (Exact name of Registrant as specified in its charter)

         North Carolina                                        56-1349259
 (State or other jurisdictions of                           (I.R.S. Employer
 incorporation or organization)                           Identification No.)

               1803 Research Blvd. Suite 201, Rockville MD 20850

                   (Address of principal executive offices)

       Registrant's telephone number, including area code: 301-309-6161

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
requirement for the past 90 days. Yes [X]  No [_]

The number of shares outstanding of issuer's Class A Common Stock, $.01 par
value per share, as of June 10, 2002 was 2,716,250. The number of shares
outstanding of issuer's Class B Common Stock, $.01 par value per share, as June
10, 2002 was 1,000,000. The Class B Common Stock is not publicly traded.

Transitional Small Business Disclosure Format (check one):
Yes [_]   No [X]
<PAGE>

                             SHERWOOD BRANDS, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
PART I   FINANCIAL INFORMATION

  Item 1.   FINANCIAL STATEMENTS

       Consolidated Balance Sheets - April 30, 2002                           1
       (unaudited) and July 31, 2001

       Consolidated Statements of Operations -
       Three and Nine months ended April 30, 2002 and 2001 (unaudited)        2

       Consolidated Statements of Cash Flows - Nine months ended
       April 30, 2002 and 2001 (unaudited)                                    3

       Notes to Consolidated Financial Statements                             4

   Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS                                         8

   Item 3.  Quantitative and Qualitative Disclosures about Market Risk       11

PART II  OTHER INFORMATION

   Item 1.  Legal Proceedings                                                12

   Item 6.  Exhibits and Reports on form 8-K                                 12

SIGNATURES                                                                   13
</TABLE>
<PAGE>

                    SHERWOOD BRANDS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  Un-Audited

<TABLE>
<CAPTION>
                                                                                   April 30, 2002              July 31, 2001
                                                                                  ----------------           -----------------
                                                                                    (unaudited)                 (audited)
                                                                                    -----------                 ---------
<S>                                                                               <C>                        <C>
                                                   Assets
Current assets
     Cash and cash equivalents                                                             630,592                     385,195
     Accounts receivable, less allowance of $404,000 and
     $189,000                                                                            3,854,511                   1,977,093
     Inventory                                                                          10,433,654                  14,709,515
     Refundable income taxes                                                               149,458                          --
     Other current assets                                                                  337,621                     344,568
     Deferred taxes on income                                                              425,000                     425,000
                                                                                  ----------------           -----------------
Total Current Assets                                                                    15,830,836                  17,841,371

Net property and equipment                                                               5,917,620                   4,906,350

Other assets                                                                               963,875                      56,391
                                                                                  ----------------           -----------------
TOTAL ASSETS                                                                            22,712,331                  22,804,112
                                                                                  ================           =================

                                       Liabilities and Stockholders' Equity

Current liabilities
     Line of credit                                                                      3,511,648                   3,842,297
     Current portion of long-term debt                                                     215,000                     215,000
     Current portion of capital lease obligation                                            31,245                      31,245
     Accounts payable                                                                    2,636,706                   3,986,845
     Accrued expenses                                                                    1,837,638                   1,558,342
     Income taxes payable                                                                  338,330                     722,474
                                                                                  ----------------           -----------------
Total current liabilities                                                                8,570,567                  10,356,203

Deferred taxes on income                                                                   244,000                     244,000
Long-term debt                                                                             550,000                     550,000
Obligations under capital lease                                                            426,733                     424,917
                                                                                  ----------------           -----------------
TOTAL LIABILITIES                                                                        9,791,300                  11,575,120
                                                                                  ----------------           -----------------
Stockholders' equity
     Preferred stock, $.01 par value, 5,000,000
        shares authorized; no shares issued or outstanding                                      --                          --
     Common stock, Class A, $.01 par value, 30,000,000
        shares authorized, 2,716,250 and 2,700,000 shares
        issued and outstanding                                                              27,163                      27,000
     Common stock, Class B, $.01 par value, 5,000,000 shares
        authorized, 1,000,000 shares issued and outstanding                                 10,000                      10,000
Additional paid-in-capital                                                               8,014,469                   7,973,538
Retained earnings                                                                        4,882,929                   3,236,724
Accumulated other comprehensive income / (loss)                                            (13,530)                    (18,270)
                                                                                  ----------------           -----------------
TOTAL STOCKHOLDERS' EQUITY                                                              12,921,031                  11,228,992
                                                                                  ----------------           -----------------
TOTAL LIABILITIES AND  STOCKHOLDERS' EQUITY                                             22,712,331                  22,804,112
                                                                                  ================           =================
</TABLE>

See Accompanying summary of accounting policies and notes to consolidated
financial statements

                                      -1-
<PAGE>

                    SHERWOOD BRANDS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
UNAUDITED                                       THREE MONTHS ENDED APRIL 30,     NINE MONTHS ENDED APRIL 30,
                                                ----------------------------     ---------------------------
                                                   2002             2001            2002             2001
                                                -----------      -----------     -----------     -----------
<S>                                             <C>              <C>             <C>             <C>
Net sales                                       $11,312,184      $14,010,737     $48,290,502     $54,567,143
Cost of sales                                     9,063,422       11,003,180      34,402,511      38,978,334
                                                -----------      -----------     -----------     -----------
Gross profit                                      2,248,762        3,007,557      13,887,991      15,588,809
                                                -----------      -----------     -----------     -----------

Selling, general and administrative expenses      1,588,005        1,405,820       6,592,152       7,124,603
Salaries and related expenses                     1,102,277        1,023,645       3,777,329       3,675,168
Non-Recurring Expenses-Moving Costs                 393,918               --         393,918              --
                                                -----------      -----------     -----------     -----------
Total operating expenses                          3,084,200        2,429,465      10,763,399      10,799,771
                                                -----------      -----------     -----------     -----------
(Loss)/Income from operations                      (835,438)         578,092       3,124,592       4,789,038
                                                -----------      -----------     -----------     -----------

Other income (expense)
 Interest income                                        460            1,023           4,340           9,034
 Interest expense                                  (114,194)        (143,861)       (402,855)       (493,798)
 Other (expense)income                               33,595           28,141          19,469         (16,686)
                                                -----------      -----------     -----------     -----------
Total other (expense)income                         (80,139)        (114,697)       (379,046)       (501,450)
                                                -----------      -----------     -----------     -----------

(Loss) Income before provision (benefit)
  for taxes on income                              (915,577)         463,395       2,745,546       4,287,588
(Benefit) Provision for taxes on income            (222,072)         166,832       1,099,341       1,566,410
                                                -----------      -----------     -----------     -----------
Net (loss) income                               $  (693,505)     $   296,563     $ 1,646,205     $ 2,721,178
                                                -----------      -----------     -----------     -----------

Net (loss) income per share-basic               $     (0.19)     $      0.08     $      0.44     $      0.74
                           -diluted                   (0.19)            0.08            0.39            0.70
                                                -----------      -----------     -----------     -----------
Weighted average shares outstanding-basic         3,716,250        3,700,000       3,707,143       3,700,000
                                   -diluted       3,716,250        3,884,491       4,243,322       3,884,491
                                                ===========      ===========     ===========     ===========
</TABLE>

See accompanying summary of accounting policies and notes to consolidated
financial statements.

                                      -2-
<PAGE>

                    SHERWOOD BRANDS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  Un-Audited

<TABLE>
<CAPTION>
                                                            Nine months ended April 30,
                                                            ---------------------------
                                                                2002           2001
                                                            ------------   ------------
<S>                                                         <C>            <C>
Cash flows from operating activities
   Net income                                               $  1,646,205   $  2,721,178
   Adjustments to reconcile net income to net
   Cash used in operating activities
   Depreciation expense                                          306,566        258,360
   Provision for inventory obsolescence                              865             --
   Provision for doubtful accounts                               245,742        245,046
   (Increase) decrease in assets
      Accounts receivable                                     (2,123,160)    (3,609,875)
      Inventory                                                4,274,996      3,128,132
      Other current assets                                      (142,511)        83,669
      Other assets                                              (907,484)         3,780
   Increase (decrease) in liabilities
      Accounts payable                                        (1,350,139)    (1,884,553)
      Accrued expenses                                           284,036        635,008
      Income taxes payable                                      (384,144)     1,177,970
                                                            ------------   ------------

Net cash provided in operating activities                      1,850,972      2,764,715

Cash flows from investing activities
   Capital expenditures                                       (1,317,836)      (742,777)
                                                            ------------   ------------
Net cash used in investing activities                         (1,317,836)      (742,777)
                                                            ------------   ------------

Cash flows from financing activities
   Net (repayments) borrowings on line of credit                (330,649)    (2,097,000)
   Other                                                          42,910        (41,418)
                                                            ------------   ------------
Net cash used by financing activities                           (287,739)    (2,138,418)
                                                            ------------   ------------

Net increase (decrease) in cash and cash equivalents             245,397       (116,480)

Cash and cash equivalents, at beginning of period                385,195        641,497
                                                            ------------   ------------

Cash and cash equivalents, at end of period                 $    630,592   $    525,017
                                                            ============   ============
</TABLE>

See Accompanying summary of accounting policies and notes to consolidated
financial statements

                                      -3-
<PAGE>

                    SHERWOOD BRANDS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.   BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Sherwood Brands,
Inc., and its wholly-owned subsidiaries, Sherwood Brands, LLC, Sherwood Brands
of RI Inc., and Sherwood Brands Overseas, Inc. ("Overseas") (collectively, the
"Company"). All material inter-company transactions and balances have been
eliminated in consolidation.

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with the consolidated financial statements, and the notes thereto,
included in the Company's Annual Report and Form 10-K filed on October 29, 2001.

2.   ORGANIZATION AND DESCRIPTION OF BUSINESS

Sherwood Brands, Inc. (formerly Sherwood Foods, Inc.) was incorporated in
December 1982 in the state of North Carolina. Sherwood Brands, Inc. manufactures
its own lines of confectionery products and demitasse \ registered
trademark\ biscuits.

Sherwood Brands, LLC, a Maryland limited liability company and wholly owned
subsidiary of Sherwood Brands, Inc. markets and distributes its own lines of
confectionery products in the United States.

Sherwood Brands Overseas, Inc., a Bahamian company and wholly owned subsidiary
of Sherwood Brands, Inc. markets and distributes the Sherwood lines of
confectionery products internationally. Sherwood Brands, LLC and Sherwood Brands
Overseas, Inc. purchase confectionery products from Sherwood Brands, Inc. as
well as third party suppliers.

Sherwood Brands of RI Inc. was incorporated in September 1998 in the state of
Rhode Island. Sherwood Brands of RI Inc. d/b/a E. Rosen Company is a
manufacturer of hard candies, jelly beans and packer of gift items and baskets.

3.   INTERIM FINANCIAL INFORMATION

The financial information as of April 30, 2002 and for the three and nine months
ended April 30, 2002 and 2001 is un-audited. In the opinion of management, such
information contains all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such periods.
Results for interim periods are not necessarily indicative of results to be
expected for an entire year.

4.   INVENTORY

Inventory consists of raw materials, packaging materials, components used in
assembly, work- in- process and finished goods and is stated at the lower of
cost or market. Cost is determined by the FIFO (first-in, first-out) method.

                                      -4-
<PAGE>

Inventory consists of the following:

                                             APRIL 30             JULY 31
                                               2002                 2001
                                            -----------         ------------
                                            (UNAUDITED)           (AUDITED)
                                            -----------         ------------
     Raw materials and ingredients          $   731,187         $  1,195,859

     Components used in assembly              1,435,172            1,564,878

     Packaging materials                      2,282,887            2,474,046

     Work-in-process and
     finished product                         6,587,124           10,175,160
                                            -----------         ------------
                                             11,036,370           15,409,943
     Less reserve for inventory allowance      (701,293)            (700,428)
                                            -----------         ------------
                                            $10,335,077         $ 14,709,515
                                            ===========         ============

5.   USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

6.   INCOME TAXES

The income tax rate utilized on an interim basis is based on the Company's
estimate of the effective income tax rate for the fiscal year ending July 31,
2002 which approximates 40%. The Company recognized $300,000 of dividend income
during the quarter for income tax reporting purposes which was eliminated for
financial reporting purposes.  This provision was offset somewhat by the decline
in pretax income for the period.

7.   EMPLOYMENT AGREEMENTS

Effective as of August 1, 2001, the employment agreements for Uziel Frydman and
Amir Frydman were extended for additional three year terms (until July 31, 2004)
and the employment agreement for Anat Schwartz was extended for an additional
six month period (until January 1, 2002), each on substantially the same terms
and conditions as in effect under their respective existing employment
agreements.  The annual base salaries payable to Uziel Frydman, Amir Frydman and
Anat Schwartz under the amended agreements were increased to $451,333, $389,149
and $270,795, respectively, effective August 1, 2001 and are subject to annual
increases.  Under the amendments to the employment agreements, each of Uziel
Frydman, Amir Frydman and Anat Schwartz are entitled to participate in our 1998
Executive Compensation Incentive Plan.  For fiscal years beginning on or after
August 1, 2001, the bonus pool will be increased proportionately to the extent
that earnings before interest, taxes, and depreciation and amortization (EBITDA)
in any year exceeds the EBITDA for the fiscal year ended July 31, 2001.

8.   EARNINGS PER SHARE

Earnings per share is based on weighted average number of shares of common stock
and dilutive common stock equivalents outstanding.  Basic earnings per share
includes no dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period.  Diluted earnings

                                      -5-
<PAGE>

per share reflects the potential dilution of securities that could share in the
earnings of an entity.  The following table presents a reconciliation between
the weighted average shares outstanding for basic and diluted earnings per share
for the three months ended April 30, 2002 and April 30, 2001 and nine months
ended April 30, 2002 and April 30, 2001.


                                                                    Per Share
For the three months ended April 30, 2002      Income      Shares     Amount
-------------------------------------------------------------------------------

Basic Earnings per Share
Income available to common shareholders      $ (693,505)  3,716,250   ($0.19)
Effect of dilutive stock options                              -----
Dilutive earnings per share                  $ (693,505)  3,716,250   ($0.19)
===============================================================================

                                                                    Per Share
For the three months ended April 30, 2001    Income       Shares     Amount
-------------------------------------------------------------------------------

Basic Earnings per Share
Income available to common shareholders      $  296,563   3,700,000  $  0.08
Effect of dilutive stock options                            184,491
Dilutive earnings per share                  $  296,563   3,884,491  $  0.08
===============================================================================


                                                                    Per Share
For the nine months ended April 30, 2002     Income       Shares     Amount
-------------------------------------------------------------------------------

Basic Earnings per Share
Income available to common shareholders      $1,646,205   3,707,143  $  0.44
Effect of dilutive stock options                            536,179
Dilutive earnings per share                  $1,646,205   4,243,322  $  0.39
===============================================================================

For the nine months ended April 30, 2001     Income       Shares     Amount
-------------------------------------------------------------------------------

Basic Earnings per Share
Income available to common shareholders      $2,721,178   3,700,000  $  0.74
Effect of dilutive stock options                            135,583
Dilutive earnings per share                  $2,721,178   3,884,491  $  0.70
===============================================================================

9.   RECENT ACQUISITION

On May 1, 2002 The Company acquired all of the outstanding common stock of Asher
Candy Acquisition Corporation, a Wyoming corporation with operations located in
New Hyde Park, New York. 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 270,000 shares of its common stock at $6.49 per share or
$1,750,000 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 having a value of $250,000. Sherwood Brands will include
operating results of the new entity in consolidated results for the fourth
quarter.

10.  LICENSING AGREEMENTS

During the Quarter the Company entered into two licensing agreements to
incorporate products into Gift sets and manufacturing of hard milk candies and
wafers. The royalty rates for such licenses are from 2% to 3% of net sales and
expire in 4 years.

                                      -6-
<PAGE>

The products to be incorporated into the Company's gift set items is during the
Christmas Holiday seasons and the hard milk candies and wafers are effective on
the selling season of January 2003.  The Company paid a $15,000 advance fee to
have the rights to incorporate products into its gift set items.  There was no
other minimum license fees under these agreements.  The Company is currently
pursuing other licenses with similar terms and conditions.

                                      -7-
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

Important Information Regarding Forward-Looking Statements

This Quarterly Report on From 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Those statements
include statements regarding the intent, belief or current expectations of the
Company and its management. Such statements are subject to a variety of risks
and uncertainties, many of which are beyond the Company's control, which could
cause actual results to differ materially from those contemplated in such
forward-looking statements, including in particular the risks and uncertainties
described under "Risk Factors" in the Company's Registration Statement on Form
SB-2, filed with the Commission on May 11, 1998. Existing and prospective
investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to update or revise the information contained in this Quarterly
Report on From 10-Q, whether as a result of new information, future events or
circumstances or otherwise.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of certain assets and liabilities at the date of the
financial statements. Significant estimates in the Company's financial
statements include the accounts receivable and inventory reserves. The Company
continually evaluates these reserves based upon historical experience. Although
actual results could differ from those disclosed, management feels that the
estimates used to establish the reserves are conservative in nature.
Furthermore, management contends that it would be unlikely that the reserve
level would be materially different from any other independently prudently
established reserve.

On May 1, 2002, the Company acquired all of the outstanding common stock of
Asher Candy Acquisition Corporation, a Wyoming corporation with operations
located in New Hyde Park, New York. Asher Candy Acquisition Corporation is a
manufacturer of candy canes and other hard candies under the "Asher" name. The
Company issued an aggregate of approximately 270,000 shares of its common stock
at $6.49 per share or $1,750,000 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 having a value of $250,000. The
Company will include operating results of the new entity in consolidated results
for the fourth quarter.

Results of Operations

THREE MONTHS ENDED April 30, 2002 AND 2001

Net sales for the three months ended April 30, 2002 and 2001 were $11,312,184
and $14,010,737 respectively. Net sales decreased 19.26% primarily due to lower
sales of jellies, the postponement of orders by a major customer and lower sales
on gift items. Wal-Mart, Kmart and Sam's Club accounted for approximately 32%,
18% and 9%, respectively, of the sales ended for the three months April 30,
2002, and Sams Clubs, Wal-Mart and Dollar General accounted for approximately
33%, 13% and 7%, respectively, of the sales for the prior year's comparable
period.

Gross profit for the three months ended April 30, 2002 and April 30,2001
decreased to $2,248,762 from $3,007,557, or to 20% from 21% as percent of sales.
The decrease in earnings was attributable largely to the lower sales on jellies
and gift items.

Selling, general and administrative expenses for the three months ended April
31, 2002 increased to $1,588,005 from $1,405,820 for the three months ended
April 30, 2001, or to 14.03% from 10.03% as a percent of sales.  The increase
was largely due to additional professional fees, carrier, and insurance
expenses.

                                      -8-
<PAGE>

Non recurring expenses-moving costs accounted for $393,918 or 3.48% as percent
of sales for the three months ended April 30, 2002, as a result of the
relocation of the manufacturing facility in Rhode Island to Chase City,
Virginia. No comparable cost or expense was incurred for the three months ended
April 30, 2001. The Company expects to incur additional moving costs in the
fourth quarter.

Salaries and related expenses for the three months ended April 30, 2002
increased to $1,102,277 from $1,023,645 for the three months ended April 30,
2001, or 9.7% from 7.3%, as a percent of sales. This increase as a percent of
sales was mainly attributable to annual salary and benefits increases for
officers and employees.

Operating expenses for the three months ended April 30, 2002 increased to
$3,084,200 from $2,429,465 for the three months ended April 30, 2001, or 27.3%
from 17.3% as a percent of sales. The increase as a percentage of sales was
largely due to increased costs of professional fees, carriers, salary and
benefits increases, insurance costs and non-recurring moving expenses.

Loss from operations for the three months ended April 30, 2002 was ($835,438),
as compared to income of $578,092 for the prior year's comparable period.  The
increase was largely attributable to $393,918 of non-recurring moving expenses
and lower sales during the quarter.

Interest income for the three months ended April 30, 2002 decreased to $460 from
$1,023 for three months ended April 30, 2001. Interest expenses decreased to
$114,194 from $143,861 due to lower interest rates on the working capital line
and term facilities. Other income (expense) increased to $33,595 from $28,141
due to realized gains on foreign exchange currency forward contracts.

The income tax rate utilized for the three-month period ended April 30, 2002 is
based on the Company's estimate of the effective tax rate for the fiscal year
ending July 31, 2002, which approximates 40%. The effective tax rate increased
from 36% to 40% in the period due to the recognition of dividend income for
income tax reporting purposes eliminated for financial reporting purposes.

NINE MONTHS ENDED April 30, 2002 AND 2001

Net sales for the nine months ended April 30, 2002 and 2001 were $48,290,502 and
$54,567,143 respectively. Net sales decreased 11.5% primarily due to lower sales
of jellies and gift items associated with Wal-Mart and Kmart, postponement of
orders by a major customer and lower sales on gift items for the Christmas
holiday, as well as economic conditions which affected retail spending in our
industry. Sam's Club, Wal-Mart and Big Lots accounted for approximately 36%, 15%
and 9%, respectively, of the sales ended April 30, 2002, and Sam's Clubs, Wal-
Mart and Kmart accounted for the period approximately 28%, 15% and 10%,
respectively, of the sales for the prior year's comparable period.

Gross profit for the nine months ended April 30, 2002 and April 30,2001
decreased to $13,887,991 from $15,588,809 and increased to 28.7% from 28.6% as a
percent of sales.  The increase in earnings was attributable largely to cost
reduction in materials, components and production labor efficiency costs.

Selling, general and administrative expenses for the nine months ended April 30,
2002 decreased to $6,592,152 from $7,124,603 for the nine months ended April 30,
2001, or 13.7% from 13.1% as a percent of sales.  The increase was largely due
to freight, travel, and carrier expenses.

Non Recurring Expenses-Moving Costs accounted for $393,918 or 3.48% as percent
of sales for the nine months ended April 30, 2002, for the relocation of the
manufacturing facility in Rhode Island to Chase City, Virginia. No comparable
costs or expense was incurred for the nine months ended April 30, 2001. The
Company expects to incur additional moving expenses in the fourth quarter.

Salaries and related expenses for the nine months ended April 30, 2002 increased
to $3,777,329 from $3,675,168 for the nine months ended April 30, 2001, or 7.8%
from 6.7%, as a percent of sales. This increase was mainly attributable to
increases in
                                      -9-
<PAGE>

annual fixed overhead salaries and benefit costs.

As a result, operating expenses for the nine months ended April 30, 2002
decreased to $10,763,399 from $10,799,771 for the nine months ended April 30,
2001 and increased to 22.3% from 19.8%, as a percent of sales.  The increase was
largely due to increased costs attributable to carriers, annual salary and
benefits increases, insurance costs and a non recurring expense of $393,918
relating to the relocation of manufacturing  from Rhode Island to Chase City,
Virginia Facility.

Income from operations for the nine months ended April 30, 2002 was $3,124,592,
as compared to $4,789,038 for the prior year's comparable period.

Interest income for the nine months ended April 30, 2002 decreased to $4,340
from $9,034. Interest expenses decreased to $402,855 from $493,798 due to
decrease in interest rates. Other income (expense) increased to $19,469 from
($16,686) expense due to realized gains on foreign exchange currency forward
contracts.

The income tax rate utilized for the nine-month period is based on the Company's
estimate of the effective tax rate for the fiscal year ending July 31, 2002,
which approximates 40%. The effective tax rate increased from 36% to 40% in the
period due to the recognition of dividend income for income tax reporting
purposes eliminated for financial reporting purposes.

As a result of the foregoing, the Company earned net income of $1,646,205 for
the nine months ended April 30, 2002, compared to net income of $2,721,178 for
the prior comparable period decreased to 3.4% from 4.98% as percent of sales.
This decrease was largely attributable to $393,918 or 3.48% of percentage of
sales on relocation expenses for the manufacturing facility from Rhode Island to
Chase City, Virginia and reduced sales for the first nine months of Fiscal 2002.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary cash requirements have been to fund the purchase,
manufacture and commercialization of its products. The Company finances its
operation and manufacturing with cash flow from operations and bank financing.
The Company's working capital at April 30, 2002 and July 31, 2001 was $7,260,269
and $7,485,168, respectively.

Net cash provided in operating activities for the nine months ended April 30,
2002 and 2001, respectively was $1,850,972 compared to $2,764,175 in the prior
comparable period. The decrease in cash provided by operating activities was due
primarily to lower net income and decreases in accounts receivable due to lower
sales, account payable, which were offset by the increase in inventory, income
taxes payable, as well as the decrease in accrued expenses.

Net cash used in investing activities increased to $1,317,836 from $742,777,
primarily due to increased equipment purchases and capital improvements for the
Company's relocation of its manufacturing operations into its Chase City,
Virginia facility.

Net cash used by financing activities was $287,739, compared to $2,138,418 in
prior periods.  This decrease was primarily due to decreased reliance on
borrowings under the Company's line of credit to finance working capital needs
for seasonal materials.  The borrowings for the period ended April 30, 2002 was
approximately $3,500,000 as compared to $3,800,000 for the prior years
comparable period.  The Company has $21,200,000 of its $25,000,000 line of
credit available to meet additional seasonal needs to purchase and manufacture
inventory. During the Quarter the Company increased its credit facility to
$25,000,000 to address the needs of additional working capital for the Asher
merger.

Principal payments for the Company's long-term debt for the twelve months ending
April 30, 2002 is $215,000. The Company believes that cash provided by
operations will be sufficient to finance its operations and fund debt service
requirements.

                                     -10-
<PAGE>

<TABLE>
<CAPTION>
Schedule of Contractual Obligations
                                                            Payments Due by Period
                                                            ----------------------
Contractual Obligation                          Total     Less Than 1 year  1-3 years   After 4 years
-----------------------------------------    -----------  ----------------  ----------  -------------
<S>                                          <C>          <C>               <C>         <C>
Long-Term Debt                               $   550,000        $   90,000  $  135,000     $  325,000
Capital Lease Obligation                         426,733            31,245     125,000        270,488
Licensing Agreements                              15,000             -----      15,000          -----
Operating Leases                               1,524,040           508,466     538,362        477,212
-----------------------------------------    -----------        ---------   ----------     ----------
Total Contractual Obligation                 $ 2,515,773        $  629,711  $  813,362     $1,072,700
                                             ===========        ==========  ==========     ==========
</TABLE>

Schedule of Commercial Commitments

<TABLE>
<CAPTION>
                                                  Amount of Commitment expiration per period
                                                  ------------------------------------------
Commercial Commitments          Total         Less Than 1 year    1-3 years    After 4 years
----------------------------   -----------   -----------------    -----------  -------------
<S>                            <C>           <C>                  <C>          <C>
Line of Credit (*)             $25,000,000               -----    $25,000,000          -----
------------------             ===========          ----------    -----------  -------------
Total Contractual Obligation   $25,000,000               -----    $25,000,000          -----
                               ===========          ==========   ============  =============
</TABLE>

(*) The line of credit is available for advances to finance working capital and
the issuance of letter of credits.  Advances under the line of credit are based
on a borrowing formula equal to 85% of eligible domestic accounts receivable
plus 60% of eligible finished goods and 30% of eligible components inventory.
The line of credit facility varies from quarter to quarter based on working
capital needs and pay-downs.

SEASONALITY

The Company's sales typically increase in the second half of the calendar
Year, principally due to the holiday season.

INFLATION
The Company does not believe that inflation has had a significant impact on the
Company's results of operations for the periods presented.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a result of its variable rate line of credit, the Company is exposed to the
risk of rising interest rates. The Company's $25,000,000 line of credit had an
interest rate ranging from 4.1% to 4.19% for the nine months ended April 30,
2002. The Company's long-term debt is at variable market tax exempt rates, which
exposes the Company to fluctuations in the market. However, since the rate is
based on the tax exempt rate, it is below the market rate.

The Company utilizes certain derivative instruments, from time to time, foreign
currency forward contracts and currency exchange rate market price risk
exposures. Foreign currency contracts are entered into for periods consistent
with related underlying exposures and do not constitute positions independent of
those exposures. The Company does not hold or issue derivative instruments for
trading purposes and is not a party to any instruments with leverage or
prepayment features. In entering into these contracts, the Corporation has
assumed risk, which might arise from possible inability of counter-parties to
meet the terms of their contracts. The Company does not expect any losses as a
result of counter-party defaults.

The Company enters into foreign exchange forward contracts to hedge transactions
primarily related to firm commitments to purchase its contract manufactured
products from foreign manufactures under terms that provide for payment of goods
in foreign currency approximately 60 to 90 days from invoice date.  Purchases of
COWS butter toffee candies and other candies from manufacturers located in
Argentina are paid in U.S. Dollars.  Purchases of RUGER wafers, ELANA Belgian
chocolate products and Zed Gum Specialty Gum products are purchased from
manufacturers located in Austria, Belgium and Ireland respectively, and are paid
for in Euros.

                                     -11-
<PAGE>

PART II OTHER INFORMATION

Item 1.   Legal Proceedings

The Company is from time to time involved in litigation incidental to the
conduct of its business. The Company is currently a plaintiff in several
actions. Management does not believe that the outcome of these actions,
individually or in the Aggregate, would have a material adverse effect on the
Company.

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

        None.

Item 5.   Other Information

        None.

Item 6.   Exhibits and Reports on Form 8-K

        (a)  Exhibits

             None.

        (b)  Reports on Form 8-K

             On May 8, 2002, the Company filled a Current Report on Form 8-K
             regarding the merger of its wholly owned subsidiary Sherwood
             Acquisition Corporation, a Wyoming corporation, with and into Asher
             Candy Acquisition Corporation, a Wyoming corporation with
             operations located in New Hyde Park, New York. 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.

                                     -12-
<PAGE>

SIGNATURES

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.

                                      SHERWOOD BRANDS, INC.

Date:  June 14, 2002                /s/ Uziel Frydman
                                          President and Chief Executive Officer

Date:  June 14, 2002                /s/ Christopher J. Willi
                                          Chief Financial Officer and Secretary

                                     -13-