FORM 10-QSB
Securities and Exchange Commission
Washington D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: March 31, 1999
Commission file number: 333-40799
THE HAVANA REPUBLIC, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 84-1346897
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1360 WESTON ROAD
WESTON, FLORIDA 33326
(Address of principal executive offices)
(Zip code)
(954) 384-6333
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 No
------ ------
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of February 10, 1999: 18,101,066 shares of common stock, no par
value per share.
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet (Unaudited)
March 31, 1999 ..................................................... 3
Consolidated Statements of Operations (Unaudited)
For the Nine Months and Three Months Ended March 31, 1999 and 1998 . 4
Consolidated Statement of Changes in Shareholders' Equity
For the Nine Months Ended December 31, 1998 ........................ 5
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended March 31, 1999 and 1998 .................. 6
Notes to Consolidated Financial Statements ............................ 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations................................. 10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings ............................................ 13
Item 4 B Submission of Matters to a Vote of Security Holders .......... 13
Item 6 - Exhibits and Reports on Form 8-K ............................. 13
Signatures ............................................................ 13
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM I: FINANCIAL STATEMENTS
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 1999
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 485,600
Accounts Receivable 12,677
Inventory 684,122
Deposits on Inventory Purchases 300,000
-----------
Total Current Assets 1,482,399
-----------
PROPERTY AND EQUIPMENT, at Cost 894,152
-----------
OTHER ASSETS:
Other 11,721
Deposits on Inventory Purchases 260,700
Investments in 50% Owned Factory 50,000
-----------
Total Other Assets 322,421
-----------
Total Assets $ 2,698,972
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 327,235
Accrued Expenses 106,537
Note Payable 190,653
-----------
Total Current Liabilities 624,425
-----------
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common Stock, No Par Value, Authorized 50,000,000 Shares;
Issued and Outstanding 21,790,819 Shares 3,015,445
Preferred Stock, No Par Value, Non-Voting,
Authorized 5,000,000 Shares; Convertible Preferred
Stock-Series A, Authorized 2,500 Shares:
863 shares issued and outstanding (Aggregate
Liquidation Preference of $1,165,050 at March 31, 1999) 1,061,675
Preferred Stock-Series B, Authorized 200,000 Shares:
200,000 shares issued and outstanding
(Aggregate Liquidation Preference of $100,000
at March 31, 1999) 40,000
Accumulated Deficit (1,939,943)
Subscription Receivables (102,630)
-----------
Total Shareholders' Equity 2,074,547
-----------
Total Liabilities and Shareholders' Equity $ 2,698,972
===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-3-
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
------------------------- --------------------------
March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
-------------- -------------- -------------- --------------
SALES
<S> <C> <C> <C> <C>
Retail Sales $ 901,164 $ 466,012 $ 318,019 $ 125,104
------------ ------------ ------------ ------------
Net Sales 901,164 466,012 318,019 125,104
COST OF SALES 448,553 268,222 161,358 60,815
------------ ------------ ------------ ------------
GROSS PROFIT 452,611 197,790 156,661 64,289
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Store Expenses 382,586 237,236 131,162 51,277
General and Administrative 233,854 430,634 68,268 141,827
Professional Fees 121,827 131,199 35,614 33,958
------------ ------------ ------------ ------------
Total Operating Expenses 738,267 799,069 235,044 227,062
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (285,656) (601,279) (78,383) (162,773)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest Income 35,084 13,339 18,367 3,259
Other Income 49,711 14,388 44,927 4,742
Interest Expense (15,000) (19,431) (5,000) (5,000)
------------ ------------ ------------ ------------
69,795 8,296 58,294 3,001
------------ ------------ ------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (215,861) (592,983) (20,089) (159,772)
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET LOSS $ (215,861) $ (592,983) $ (20,089) $ (159,772)
============ ============ ============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.13) $ -- $ (0.09)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 21,790,918 9,582,718 19,675,326 10,028,485
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
-4-
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Nine Months Ended March 31, 1999
<TABLE>
<CAPTION>
Preferred Stock A & B Common Stock Accumulated Subscription
--------------------- ------------ ----------- ------------
Shares Amount Shares Amount Deficit Receivables Total
------ ------ ------ ------ ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - June 30, 1998 50,980 $ 1,230,610 18,101,066 $ 2,906,510 $(1,724,082) $ (137,630) $ 2,275,408
Conversion of preferred shares (117) $ (143,935) 3,689,753 143,935 -- -- --
Revaluation of common shares
issued in exchange for
for future services on
September 30, 1998 -- -- -- (35,000) -- 35,000 --
Preferred shares issued to
pay accrued salaries 150,000 15,000 -- -- -- -- 15,000
Net loss for the six months
ended December 31, 1998 -- -- -- -- (215,861) -- (215,861)
------- ----------- ---------- ----------- ----------- ----------- -----------
BALANCE - December 31, 1998 200,863 $ 1,101,675 21,790,819 $ 3,015,445 $(1,939,943) $ (102,630) $ 2,074,547
======= =========== ========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-5-
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------
March 31, 1999) March 31, 1998
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (215,861) $ (592,983)
Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities:
Depreciation and Amortization 85,044 51,597
Common Stock Issude for Services -- 142,970
(Increase) Decrease in:
Accounts Receivable (11,096) (5,331)
Inventory 89,291 (296,601)
Prepaid Expenses and Other 8,095 (2,500)
Deposits on Inventory Purchases 56,000 (175,000)
Other -- 20,320
Increase (Decrease) in:
Accounts Payable 174,399 14,191
Accrued Expenses 16,484 26,211
Deferred Membership Revenue (4,784) (14,358)
Due to Related Party -- (750)
----------- -----------
Net Cash Used in Operating Activities 197,572 (832,234)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (504,748) (239,521)
----------- -----------
Net Cash Used in Investing Activities (504,748) (239,521)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock -- 50,000
Proceeds from Issuance of Preferred Stock Series A -- 1,883,450
Repayment of Note Borrowings -- (209,347)
----------- -----------
Net Cash Provided by Financing Activities -- 1,724,103
----------- -----------
Net Increase (Decrease) in Cash (307,176) 652,348
Cash - Beginning of Year 792,776 219,294
----------- -----------
Cash - End of Year $ 485,600 $ 871,642
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid during the Year for Interest $ --
===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Preferred shares issued for accrued salaries $ 15,000
===========
Recognition of Preferred Stock Dividend on Beneficial Conversion $ --
===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-6-
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. BASIS OF PRESENTATION
---------------------
The accompanying financial statements for the interim periods are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the periods presented. These
financial statements should be read in conjunction with the financial statements
and notes thereto, together with Management's Discussion and Analysis of
Financial Condition and Results of Operations, contained in the Annual Report on
Form 10-KSB for the year ended June 30, 1998, of The Havana Republic, Inc. (the
"Company") as filed with the Securities and Exchange Commission. The results of
operations for the nine months ended March 31, 1999 are not necessarily
indicative of the results for the full fiscal year ending June 30, 1999.
Note 2. LOSS PER SHARE
--------------
The Company has adopted Statement of Financial Accounting Standards No. 128 -
"Earnings Per Share" ("FAS 128") which requires the dual presentation of basic
and diluted earnings per share for the periods ending after December 15, 1997.
Basic earnings per share is computed by dividing net income, after deducting
preferred stock dividends accumulated during the period (the 9 months ended
March 31, 1998, include preferred stock dividends on beneficial conversions), by
the weighted average number of shares of common stock outstanding during each
period. Diluted earnings per share is computed by dividing net income by the
weighted average number of shares of common stock, common stock equivalents and
other potentially dilutive securities outstanding during each period. In
accordance with the provisions of FAS 128, the Company has retroactively
restated earnings per share.
Note 3. INVENTORIES
-----------
The major classes of inventories are as follows:
MARCH 31, 1999
Cigars ............................................ $ 361,818
Accessories.......................................... 322,304
-------------
$ 684,122
=============
-7-
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4. Shareholders' Equity
COMMON STOCK
In November 1997, the Company issued 644,026 and 90,000 common shares valued at
a fair market value of $1.17 per share for future construction services rendered
in connection with the construction of leased premises housing the Company's
future stores and printing services, respectively. Accordingly, as of November
1997 the Company had recorded a subscription receivable and had a related charge
to common stock amounting to $855,299. The Company adjusted the subscription
value of these shares in September 1998, to reflect the fair market value of
$.1875 per share aggregating $137,630. As of September 30, 1998, the Company
reduced the value by an additional $35,000 and had not received any services
related to these shares.
PREFERRED STOCK
On December 9, the Board of Directors authorized the creation of an additional
150,000 shares of Series B Preferred Stock which will bring the total authorized
Series B Preferred Stock to 200,000 shares. Each share ("Share") of Series B
preferred Stock issued shall be entitled to 400 votes, but the Shares are not
entitled to any dividends. The Shares shall be restrictive securities and not
convertible into shares of the Company's common stock; 75,000 shares were issued
to each of two offices for forgiveness of an aggregate of $15,000 in accrued
salaries.
During the three months ended March 31, 1999, Series A Preferred Shareholders
converted 117 preferred shares into 3,689,753 common shares. Between April 5,
1999, and April 20, 1999, an additional 183 Series A preferred shares were
converted into 4,040,384 common shares.
-8-
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 5. OTHER
-----
NICARAGUAN FACTORY AND DISTRIBUTION
The Company invested $50,000 in January 1997 for a 50% interest in Tabanica, a
Nicaraguan corporation, which owns a manufacturing facility in Jalapa,
Nicaragua. The Company has the right to purchase cigars from Tabanica at cost
plus 50% through October 31, 2001. The Company believes that this arrangement
will provide it with a continuous source of premium cigars and an ability to
develop its own private label brand cigar. However, the operation of
manufacturing facilities outside of the United States, especially in less
developed countries such as Nicaragua, is subject to numerous risks, including
political and currency instability, currency control and exchange regulations,
and import and export regulations, any of which could have a material adverse
effect upon the Company's cigar supply. The initial reason for the delay was due
to a dispute with Banana Republic relating to the label. The Company is in the
process of resolving this dispute and anticipates the resolution will not have a
material effect. In addition, the recent hurricane in Nicaragua has affected the
expected delivery of cigars. Therefore it is not possible to predict whether the
Company's investment in and agreement with Tabanica will result in a stable and
long-term supply of premium cigars. Whether the Company will timely recover the
deposits depends on inventory purchases. The Company is in the process of
developing a wholesale operation for the distribution of the private label brand
cigar. The Company has accounted for $300,000 of the deposit on inventory
purchases as current. In March, 1999, the Company received $50,000 from Tabanica
and reduced the deposit. In addition, the Company received $6,000 of cigars.
Subsequent to March 31, 1999, the Company expects to begin receiving
approximately $25,000 per month of cigars.
Note 6. COMPREHENSIVE INCOME
--------------------
During the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."
This pronouncement sets forth requirements for disclosure of the Company's
comprehensive income and accumulated other comprehensive items. In general,
comprehensive income combines net income and "other comprehensive items," which
represent certain amounts that are reported as components of shareholders'
investment in the accompanying balance sheets, including foreign currency
translation adjustments. For the nine months ended March 31, 1999 and 1998, the
Company had no comprehensive income.
Note 7. FUTURE EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------------------------
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131") was issued in June 1997. This statement changes
the way public companies report information about segments of their business in
their annual financial statements. This statement is effective for the Company's
fiscal year ending June 30, 1999. However, information is not to be presented
for interim financial statements in the first year of implementation. Adoption
of SFAS No. 131 is not expected to have a material effect on the Company's
financial statement disclosures.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report on Form 10-QSB contains forward-looking statements which are made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995 and which are subject to risks and uncertainties which could cause
actual results to differ materially from those discussed in the forward-looking
statements and from historical results of operations. Among the risks and
uncertainties which could cause such a difference are those relating to the
Company's reliance upon suppliers for the purchase of finished products which
are then resold by it, the Company's dependence upon certain key personnel, its
ability to manage its growth, and the risk of economic and market factors
affecting the Company or its customers.
RESULTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1999 COMPARED TO NINE MONTHS ENDED MARCH 31, 1998
Net sales for the nine months ended March 31, 1999 were $901,000, an increase of
93% as compared to sales for the nine months ended March 31, 1998 which were
$466,000. This increase of $435,000 is attributable primarily to the fact that
for the nine months ended March 31, 1998, the Company only had one emporium
operational. The Company's new Las Olas store accounted for $558,000 of sales
for the nine months. Cost of sales was $449,000 or 50% of sales for the nine
months ended March 31, 1999 as compared to $268,000 or 58% of sales for the nine
months ended March 31, 1998. This decrease as a percentage of sales was
primarily a result of a decrease in cigar costs in relation to the sales volume.
The costs declined as more product became available and with the Company's
increased buying power.
Gross profit was $453,000 or 50% of sales for the nine months ended March 31,
1999 as compared to gross profit of $198,000 or 42% of sales for the nine
months ended March 31, 1998. The increase in the gross profit is due to the new
emporium on Las Olas and maintaining premium prices at this new emporium and
improved purchasing power.
Store expenses, which include marketing and advertising expenses, depreciation,
rent and salary costs, were $382,000 or 43% of sales for the nine months ended
March 31, 1999 as compared to $237,000 or 51% of sales for the nine months ended
March 31, 1998. The percentage decrease in store expenses in relationship to
sales is primarily attributed to the fact that the Company opened its second
store during June 1998 and has implemented operating efficiencies in payroll and
other costs reducing store operating costs to an average of $191,000 per store
for the nine months as compared to the operation of one store in 1998 with costs
of $237,000.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
General and administrative expenses, which includes administrative salaries,
travel and entertainment, insurance and other expenses, were $234,000 or 26% of
sales for the nine months ended March 31, 1999 as compared to $431,000 or 92% of
sales for the nine months ended March 31, 1998. The decrease in relation to
sales is primarily attributable to the reduction of promotional costs and
implementing operational efficiencies.
Other income includes an increase in interest income on funds received in a
private offering and proceeds of approximately $50,000 from the settlement of a
dispute relating to delays in opening the Company's Las Olas emporium.
As a result of the foregoing factors, the Company incurred losses of
approximately $216,000 or ($.01) per share for the nine months ended March 31,
1999 as compared to a loss of approximately $593,000 or ($.13) per share for the
nine month period ended March 31, 1998. The per share less in 1998 includes $.07
attributable to preferred stock dividends on beneficial conversions.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1998
Net sales for the three months ended March 31, 1999 were $318,000, an increase
of 154% as compared to sales for the three months ended March 31, 1998 which
were $125,000. This increase of $193,000 is attributable primarily to the fact
that for the three months ended March 31, 1998, the Company only had one
emporium operational. The Company's new store accounted for a $225,000 increase
offset by a reduction of approximately $32,000 in the Company's Weston store.
Gross profit was $157,000 or 49% of sales for the three months ended March 31,
1999 as compared to gross profit of $64,000 or 51% of sales for the three months
ended March 31, 1998.
Store expenses, which include marketing and advertising expenses, depreciation,
rent and salary costs, were $131,000 or 41% of sales for the three months ended
March 31, 1999 compared to $51,000 or 41% of sales in 1998.
General and administrative costs decreased by approximately $73,000 in 1999
compared to the previous quarter previously due to Company promotional costs
incurred in developing the Company in the marketplace and operational
efficiencies.
Other income includes an increase in interest income on funds received in a
private offering and proceeds of approximately $50,000 from the settlement of a
dispute relating to delays in opening the Company's Las Olas emporium.
As a result of the foregoing factors, the Company sustained losses of
approximately $20,000 or ($.00) per share for the three months ended March 31,
1999 as compared to a loss of approximately $160,000 or ($.09) per share for the
three month period ended March 31, 1998. The per share loss in 1998 includes
$.07 attributable to preferred stock dividends.
-11-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had working capital of approximately $858,000.
Since its inception, it has incurred losses of approximately $1,940,000. The
Company's operations and growth has been funded by loans from third parties, the
sale of common stock with gross proceeds of approximately $1,000,000 and the
issuance of Series A Convertible Preferred Stock which resulted in net proceeds
to the Company of approximately $1,883,000 after expenses. These funds have been
used for working capital, capital expenditures,
In April of 1996, the Company entered into an agreement with Tabanica, the 50%
owned factory, for future purchases of premium cigars and has paid $617,000. The
Company anticipated receiving the premium cigars in monthly shipments of 50,000
commencing in January 1998. As of March 31, 1999, the Company has not received
many of these cigars. The initial reason for the delay was the Company's dispute
with Banana Republic. The company is in the process of resolving this dispute
and anticipates the costs will not be material and that shipments of cigars from
Tabanica will commenced in March, 1999. The Company's future commitment of
capital resources to the distribution of its brand name cigars will be largely
dependent upon market acceptance of these cigars.
Around July 1, 1998, the Company opened its second emporium in the Las Olas
Riverfront in Fort Lauderdale, Florida. The Company anticipates that it will
open its third and largest emporium at the Shops of Sunset Place in the central
business district of South Miami, Florida on June 1, 1999. Leasehold
improvements for the Sunset Place emporium are expected to cost approximately
$400,000 to $500,000. The Company is also constructing a fully interactive E
commerce site which will be operational in June, 1999.
The Company has no other material commitments for capital expenditures. The
Company believes that it has sufficient liquidity to meet all of its cash
requirements for the next 12 months and that subsequent store and distribution
sales would provide sufficient cash flows to meet their operating needs and grow
its regional market share. The Company believes, however, that additional
funding will be necessary to expand into markets outside of South Florida.
RISK OF YEAR 2000 ISSUES
The Company believes it does not utilize software within its business processes
that may be impacted by the year 2000 issue. The year 2000 issue exists because
many computer systems and applications currently use two digit date fields to
designate a year. Data sensitive systems may recognize the year 2000 as 1900, or
not at all. This inability to properly treat the year 2000 could cause systems
to process critical financial and operational information incorrectly.
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
-----------------
The Company is not involved in any material litigation
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
-------------------------------------------------
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
None
(b) REPORTS ON FORM 8-K
There were no Current Reports on Form 8-K filed by the Company during
the three months ended March 31, 1999.
-13-
<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.
THE HAVANA REPUBLIC, INC.
Dated: May 10, 1999 By:/S/ STEVEN SCHATZMAN
--------------------------------
Steven Schatzman, President
-14-
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------ ----------- --------
1 Financial Data Schedule *1
*1 Filed electronically pursuant to Item 401 of Regulation S-T.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 485,600
<SECURITIES> 0
<RECEIVABLES> 12,677
<ALLOWANCES> 0
<INVENTORY> 684,122
<CURRENT-ASSETS> 1,482,399
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,698,972
<CURRENT-LIABILITIES> 624,425
<BONDS> 0
<COMMON> 3,015,445
0
1,101,675
<OTHER-SE> (2,042,573)
<TOTAL-LIABILITY-AND-EQUITY> 2,698,972
<SALES> 901,164
<TOTAL-REVENUES> 901,164
<CGS> 448,553
<TOTAL-COSTS> 448,553
<OTHER-EXPENSES> 738,267
<LOSS-PROVISION> (285,656)
<INTEREST-EXPENSE> 15,000
<INCOME-PRETAX> (215,861)
<INCOME-TAX> 0
<INCOME-CONTINUING> (215,861)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215,861)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
