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: September 30, 2000
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 x No
--- ---
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of November 2, 1999: 34,901,073 shares of common stock, no par
value per share.
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THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet (Unaudited)
September 30, 2000.......................................3
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended September 30, 2000
and 1999.................................................4
Consolidated Statement of Changes in Shareholders' Equity
For the Three Months Ended September 30, 2000............5
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended September 30, 2000
and 1999.................................................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 - Submission of Matters to a Vote of Security Holders..........3
Item 6 - Exhibits and Reports on Form 8-K.............................13
Signatures............................................................13
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<TABLE>
<CAPTION>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2000 (Unaudited)and June 30, 2000
ASSETS
September 30, June 30,
2000 2000
CURRENT ASSETS:
<S> <C> <C>
Cash $ 784,049 $ 995,017
Accounts Receivable 17,221 15,680
Inventory 710,122 635,209
Deposits on Inventory Purchases 150,000 150,000
----------- -----------
Total Current Assets 1,661,392 1,795,906
----------- -----------
PROPERTY AND EQUIPMENT, at Cost (Net of Accumulated Depreciation and
Amortization of $288,489 and $256,537, respectively) 701,104 716,728
----------- -----------
OTHER ASSETS:
Other 7,534 8,117
Deposits on Inventory Purchases 347,675 347,675
Deferred Income Tax Asset, Net of Valuation Allowance of $930,000
and $867,000, respectively -- --
Investments in 50% Owned Factory 50,000 50,000
----------- -----------
Total Other Assets 405,209 405,792
----------- -----------
Total Assets $ 2,767,705 $ 2,918,426
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 487,048 $ 435,440
----------- -----------
Total Current Liabilities 487,048 435,440
----------- -----------
COMMITMENTS
SHAREHOLDERS' EQUITY:
Preferred Stock, No Par Value, Non-Voting,
Authorized 5,000,000 Shares;
Convertible Preferred Stock-Series A,
Authorized 2,500 Shares: 349 shares issued and
and outstanding (Aggregate Liquidation
Preference of $ 471,150) 483,906 483,906
Preferred Stock-Series B, Authorized 500,000 Shares:200,000
shares issued and outstanding
(Aggregate Liquidation Preference of $100,000) 40,000 40,000
Convertible Preferred Stock-Series C, Authorized 100
Shares: 90 shares issued and outstanding (Aggregate
Liquidation Preference of $ 900,000) 900,000 900,000
Convertible Preferred Stock-Series D, Authorized 50
Shares: 50 shares issued and outstanding
(Aggregate Liquidation Preference of $ 500,000) 500,000 500,000
Common Stock, No Par Value, Authorized 200,000,000 Shares;
Issued and Outstanding 34,901,073 Shares and
Additional Paid-in Capital 4,968,173 4,968,173
Accumulated Deficit (4,474,547) (4,272,218)
Subscriptions Receivable (136,875) (136,875)
----------- -----------
Total Shareholders' Equity 2,280,657 2,482,986
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,767,705 $ 2,918,426
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-3-
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<TABLE>
<CAPTION>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
--------------------------
September 30, September 30,
2000 1999
-----------------------------
<S> <C> <C>
SALES $ 247,364 $ 290,059
------------ ------------
Net Sales 247,364 290,059
COST OF SALES 116,080 140,351
------------ ------------
GROSS PROFIT 131,284 149,708
------------ ------------
OPERATING EXPENSES:
Store Expenses 121,764 147,799
General and Administrative 171,577 144,149
Depreciation and Amortization 32,535 31,583
Professional Fees 21,315 8,862
------------ ------------
Total Operating Expenses 347,191 332,393
------------ ------------
LOSS FROM OPERATIONS (215,907) (182,685)
------------ ------------
OTHER INCOME (EXPENSE):
Interest Income 13,578 4,439
Interest Expense -- (223,593)
------------ ------------
13,578 (219,154)
------------ ------------
NET LOSS APPLICABLE TO COMMON STOCK $ (202,329) $ (401,839)
============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.01)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 34,901,073 28,305,789
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-4-
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<TABLE>
<CAPTION>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
For the Three Months Ended September 30, 2000
(Unaudited)
PREFERRED STOCK A PREFERRED STOCK B PREFERRED STOCK C PREFERRED STOCK C
----------------- ----------------- ----------------- -----------------
STOCK AMOUNT STOCK AMOUNT STOCK AMOUNT STOCK AMOUNT
----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - July 1, 2000 349 $ 483,906 200,000 $ 40,000 90 $ 900,000 50 $ 500,000
Net loss for the three months
ended September 30,-2000 -- -- -- -- -- -- -- --
----- --------- ------- ---------- ------ ---------- ----- -----------
BALANCE - September 30, 2000 349 $ 483,906 200,000 $ 40,000 90 $ 900,000 50 $ 500,000
===== ========= ======= ========== ====== ========== ===== ===========
COMMON STOCK
AND
ADDITIONAL PAID-IN
CAPITAL
------------------ ACCUMULATED SUBSCRIPTIOINS
SHARE AMOUNT DEFICIT RECEIVABLE TOTAL
---------- ----------- ------------- ------------ ----------
BALANCE - July 1, 2000 34,901,073 $ 4,968,173 $ (4,272,218) $ (136,875) $ 2,482,986
Net loss for the three months
ended September 30,-2000 -- -- (202,329) -- (202,329)
---------- ----------- ------------ ---------- ----------
BALANCE - September 30, 2000 34,901,073 $ 4,968,173 $ (4,474,547) $ (136,875) $ 2,280,657
========== =========== ============ ========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
--------------------------
September 30, 2000 September 30, 1999
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $(202,329) $(401,839)
Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities:
Depreciation and Amortization 32,535 31,583
Amortization of Beneficial Conversion
Feature on Debentures and Notes -- 223,593
(Increase) Decrease in:
Accounts Receivable (1,541) (4,981)
Inventory (74,913) (9,402)
Increase (Decrease) in:
Accounts Payable 51,608 (86,400)
Accrued Expenses -- (49,637)
Deferred Membership Revenue -- (1,304)
--------- ---------
Net Cash Used in Operating Activities (194,640) (298,387)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Refund on Leasehold Improvements -- 73,640
Acquisition of Property and Equipment (16,328) (8,822)
--------- ---------
Net Cash Provided by (Used in) Investing Activities (16,328) 64,818
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Note Borrowings -- (30,000)
--------- ---------
Net Cash Used in Financing Activities -- (30,000)
--------- ---------
Net Decrease in Cash (210,968) (263,569)
Cash - Beginning of Year 995,017 705,150
--------- ---------
Cash - End of Year $ 784,049 $ 441,581
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid during the Year for Interest $ -- $ --
========= =========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Recognition of Preferred Stock Dividend
on Beneficial Conversion $ -- $ 600,000
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<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, 2000, of The Havana Republic, Inc. (the
"Company") as filed with the Securities and Exchange Commission. The results of
operations for the three months ended September 30, 2000 are not necessarily
indicative of the results for the full fiscal year ending June 30, 2001.
Note 2. INVENTORIES
The major classes of inventories are as follows:
SEPTEMBER 30, 2000
------------------
Cigars .....................................$ 344,016
Accessories..................................... 366,106
---------
$ 710,122
=========
Note 3. SHAREHOLDERS' EQUITY
On November 9, 2000, the Company filed a registration statement with the
Securities and Exchange Commission offering 4,350,000 shares of common stock to
individuals for legal and consulting services. The Company will charge
operations for the fair value of these shares as those services are provided.
<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
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999.
Net sales for the three months ended September 30, 2000 decreased approximately
15% or approximately $43,000 from the sales for the three months ending
September 30, 1999. The Company believes the decline in net sales was reflective
of the nationwide trend and the slow down in cigar retail sales. Because the
Company expects to face less competition in Fiscal 2001 due to weaker retail
establishments closing combined with the Company's new projects which the
Company believes are in prime locations, the Company expects sales to increase
to its past performances in Fiscal 2001. However, there can be no assurance that
these expectations will be met.
The cost of sales for the three months ended September 30, 2000, were
approximately $116,000 or approximately 47% of sales, as compared to $140,000 or
approximately 48% of sales for the three months end September 30, 1999.
Gross profit for the three months ended September 30, 2000, was $131,000 which
was equivalent to approximately 53% of sales as compared to $150,000 which was
equivalent to approximately 52% for the same period in 1999.
For the three months ended September 30, 2000, total operating expenses
increased to approximately $347,000 from $332,000, an increase of approximately
$15,000 for the time period in 1999. This increase was primarily attributable to
increased professional fees and general administrative fees relative to
expansion, offset by a decrease in store expenses.
Store expenses for the three months ended September 30, 2000, decreased by
approximately $26,000 to approximately $122,000 from approximately $148,000 for
the same period in 1999. The reason for this decrease was to the Company's in
streamlining its operations.
<PAGE>
For the three month period ending September 30, 2000, the company had a net loss
of $202,000 as opposed to a net loss of approximately $402,000, or decrease of
$200,000 for the same period in 1999. This was primarily attributable to the
Company's elimination of its interest expense related to its debentures which
did not occur in Fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had working capital of approximately
$1,174,000. Since its inception, the Company has continued to sustain losses.
The Company's operations and growth has been funded by the sale of common stock,
Preferred Stock and Convertible Debentures. For the period ending September 30,
2000, the Company did not raise any money and no securities were issued.
<PAGE>
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 will provide sufficient cash flows to meet their operating
needs. The Company believes, however, that additional funding will be necessary
to expand its markets.
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
its fiscal quarter ended September 30, 1999.
<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: November 2, 1999 By: /S/
-----------------
Steven Schatzman, President
13
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION LOCATION
------ ----------- --------
1 Financial Data Schedule *1
*1 Filed electronically pursuant to Item 401 of Regulation S-T.
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