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: December 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 X No
----- -----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of February 8, 2000: ----------------- shares of common stock,
no par value per share.
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
INDEX
<TABLE>
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<S> <C>
Consolidated Balance Sheet (Unaudited)
December 31, 1999 ................................................................ 3
Consolidated Statements of Operations (Unaudited)
For the Six Months and Three Months Ended December 31, 1999 and 1998 ............. 4
Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
For the Six Months Ended December 31, 1999 ....................................... 5
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended December 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 - Submission of Matters to a Vote of Security Holders ................................. 13
Item 6 - Exhibits and Reports on Form 8-K .................................................... 13
Signatures ................................................................................... 13
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM I: FINANCIAL STATEMENTS
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1999
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 387,389
Accounts Receivable 10,855
Inventory 762,791
Deposits on Inventory Purchases 300,000
-----------
Total Current Assets 1,461,035
-----------
PROPERTY AND EQUIPMENT, at Cost (Net of Accumulated Depreciation and
Amortization of $192,010) 781,375
-----------
OTHER ASSETS:
Other 9,366
Deposits on Inventory Purchases 216,600
Investments in 50% Owned Factory 50,000
-----------
Total Other Assets 275,966
-----------
Total Assets $ 2,518,376
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 224,400
Accrued Expenses 154,729
Deferred Membership Revenue 6,854
-----------
Total Current Liabilities 385,983
-----------
Debentures Payable 258,464
-----------
COMMITMENTS
SHAREHOLDERS' EQUITY:
Preferred Stock, No Par Value, Non-Voting, Authorized 5,000,000 Shares;
Convertible Preferred Stock-Series A, Authorized 2,500 Shares: 586 shares issued and
and outstanding (Aggregate Liquidation Preference of $ 791,100 at December 31, 1999) 720,906
Preferred Stock-Series B, Authorized 200,000 Shares: 200,000 shares issued and outstanding
(Aggregate Liquidation Preference of $100,000 at December 31, 1999) 40,000
Common Stock, No Par Value, Authorized 50,000,000 Shares;
Issued and Outstanding 30,350,043 Shares 4,175,459
Accumulated Deficit (2,925,561)
Subscription Receivables (136,875)
-----------
Total Shareholders' Equity 1,873,929
-----------
Total Liabilities and Shareholders' Equity $ 2,518,376
The accompanying notes are an integral part of these consolidated financial statements.
-3-
</TABLE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
---------------------------- ----------------------------
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
SALES
<S> <C> <C> <C> <C>
Retail Sales $ 651,490 $ 583,145 $ 362,735 $ 322,447
Memberships 3,537 4,784 2,233 --
------------ ------------ ------------ ------------
Net Sales 655,027 587,929 364,968 322,447
COST OF SALES 366,142 287,195 225,791 194,635
------------ ------------ ------------ ------------
GROSS PROFIT 288,885 300,734 139,177 127,812
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Store Expenses 285,452 165,586 137,653 61,762
General and Administrative 300,581 204,092 156,432 127,928
Depreciation and Amortization 63,082 47,332 31,499 31,749
Professional Fees 47,163 86,213 38,301 52,560
------------ ------------ ------------ ------------
Total Operating Expenses 696,278 503,223 363,885 273,999
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (407,393) (202,489) (224,708) (146,187)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest Income 8,972 16,717 4,533 7,184
Interest Expense (285,660) (10,000) (62,067) (5,000)
------------ ------------ ------------ ------------
(276,688) 6,717 (57,534) 2,184
------------ ------------ ------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (684,081) (195,772) (282,242) (144,003)
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET LOSS $ (684,081) $ (195,772) $ (282,242) $ (144,003)
============ ============ ============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.02) $ (0.01) $ (0.01) $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 29,806,942 18,101,066 30,182,843 18,101,066
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
-4-
</TABLE>
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Six Months Ended December 31, 1999
<TABLE>
<CAPTION>
Preferred Stock A & B Common Stock
--------------------- ------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
BALANCE - June 30, 1999 200,586 $ 760,906 28,276,693 $ 3,771,386
Issuance of Common Stock for Payment of Note Payable
and Interest -- -- 1,800,000 106,218
Amortization of Beneficial Conversion Feature -- -- -- 251,283
Issuance of Common Stock for Services -- -- 273,350 46,572
Net loss for the six months ended December 31, 1999 -- -- -- --
----------- ----------- ----------- -----------
BALANCE - December 31, 1999 200,586 $ 760,906 30,350,043 $ 4,175,459
=========== =========== =========== ===========
Accumulated Subscription
Deficit Receivables Total
------- ----------- -----
BALANCE - June 30, 1999 $(2,241,480) $ (214,375) $ 2,076,437
Issuance of Common Stock for Payment of Note Payable
and Interest -- 77,500 183,718
Amortization of Beneficial Conversion Feature -- -- 251,283
Issuance of Common Stock for Services -- -- 46,572
Net loss for the six months ended December 31, 1999 (684,081) -- (684,081)
----------- ----------- -----------
BALANCE - December 31, 1999 $(2,925,561) $ (136,875) $ 1,873,929
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
-5-
</TABLE>
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
-------------------------
December 31, December 31,
1999 1998
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $(684,081) $(195,772)
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used) in
Operating Activities:
Depreciation and Amortization 63,082 47,332
Amortization of Beneficial Conversion Feature on Debentures and Notes 285,649 --
Common Stock Issued in Exchange for Services 46,572 --
(Increase) Decrease in:
Accounts Receivable (4,895) (9,637)
Inventory 12,571 54,575
Prepaid Expenses and Other 30 28,340
Increase (Decrease) in:
Accounts Payable (48,858) 361,152
Accrued Expenses (17,808) 2,193
Deferred Membership Revenue (4,841) (4,784)
--------- ---------
Net Cash Provided by (Used) in Operating Activities (352,579) 283,399
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Refund on Leasehold Improvements 73,640 --
Acquisition of Property and Equipment (8,822) (481,414)
--------- ---------
Net Cash Provided by (Used) in Investing Activities 64,818 (481,414)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Note Borrowings (30,000) --
--------- ---------
Net Cash (Used) in Financing Activities (30,000) --
--------- ---------
Net Decrease in Cash (317,761) (198,015)
Cash - Beginning of Year 705,150 792,776
--------- ---------
Cash - End of Year $ 387,389 $ 594,761
========= =========
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
========= =========
Issuance of Common Stock for Services $ 37,500 $ --
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
-6-
</TABLE>
<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, 1999, of The Havana Republic, Inc. (the
"Company") as filed with the Securities and Exchange Commission. The results of
operations for the six months ended December 31, 1999 are not necessarily
indicative of the results for the full fiscal year ending June 30, 2000.
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, 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:
DECEMBER 31, 1999
Cigars ............................................ $402,805
Accessories.......................................... 359,986
-------------
$ 762,791
7
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4. CONVERTIBLE DEBENTURES
On June 22, 1999, the Company placed $500,000 face amount of 8% convertible
debentures due with accrued interest on or before June 21, 2002. The Company
also issued 4,000,000 warrants to the debenture holders to purchase 4,000,000
shares of the Company's common shares between June 22, 1999 and June 21, 2002 at
the following prices per share:
2,000,000 shares at $.10 per share
1,000,000 shares at $.13 per share
1,000,000 shares at $.16 per share
The Company has valued the warrants and allocated $228,000 of the proceeds to
the debt and $277,223 to the warrants. The $277,223 discount is being amortized
as interest over the three-year life of the debentures. $34,368 has been
amortized during the six months ended December 31, 1999.
The debentures are convertible 120 days from June 22, 1999 into common shares at
a price equal to the lesser of 65% of the average closing bid price for the five
trading days preceding conversion or $.078 per share. The Company, at its
option, may elect to pay on the maturity date all accrued interest in shares of
its common stock pursuant to the conversion formula. The Company has allocated
$269,230 to the beneficial conversion feature based on that feature's intrinsic
value assuming the conversion terms most beneficial to the debenture holder and
is being amortized as interest expense over a 120-day period commencing June 22,
1999. Amounts allocated to the warrants and the beneficial conversion feature
aggregating $531,000 have been credited to capital stock. As of December 31,
1999, the Company has reserved 4,000,000 shares for the exercise of warrants and
approximately 6,400,000 shares for the conversion of debentures. Interest has
been charged during the six months ended December 31, 1999 for $251,281 which
represents the unamortized remaining maturity beneficial conversion feature at
June 30, 1999.
Note 5. SHAREHOLDERS' EQUITY
COMMON STOCK
In August 1999, the Company repaid a note payable by payment of $30,000 in cash
as well as the issuance of an aggregate of 2,400,000 shares of the Company's
common stock, 600,000 shares which were reissued from previously outstanding
common shares and freely tradable and the remaining 1,800,000 common shares
restricted pursuant standard Rule 144 legend.
In November 1999 and December 1999, the Company issues 195,360 shares and 78,000
shares, respectively, for consulting and public relations services. As a result,
approximately $46,000 was charged to operations, based on the respective fair
values on the dates of the transactions.
8
<PAGE>
THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 six months ended December 31, 1999 and 1998,
the Company had no comprehensive income.
Note 7. SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Company had two conversions of its Series A
Convertible Preferred Stock. In the first conversion, 125 Preferred Shares were
converted into 2,551,020 common stock. In the second conversion, 112 Preferred
Shares were converted into 2,000,000 of common stock.
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
SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO SIX MONTHS ENDED
DECEMBER 31, 1998
Net sales for the six months ended December 31, 1999 were $655,027, an increase
of 11.4% as compared to sales for the six months ended December 31, 1998 which
were $587,929. This increase is attributable to the opening of a third store.
When comparing the same store sales, sales for the six months ended December 31,
1999 were $447,423 when compared to the $587,929, this is a decrease of
$140,506. This decrease is attributable to a temporary softening of the market
which has been influenced by the deep discount closeout cigars that are still in
the marketplace. The Company's management believes this to be a temporary
situation and the Company will continue to remain dedicated to importing name
brand products.
Cost of sales was $366,142 or 55.9% of sales for the six months ended December
31, 1999 as compared to $287,195 48.8% of sales for the six months ended
December 31, 1998. This increase as a percentage of sales was primarily a result
of stabilization of the market and achieving our standard gross profit.
Gross profit was $288,885 or 44.1% of sales for the six months ended December
31, 1999 as compared to gross profit of $300,734 or 51.2% of sales for the six
months ended December 31, 1998.
Store expenses, which include marketing and advertising expenses, rent and
salary costs, were $285,452 or 43.6% of sales for the six months ended December
31, 1999 as compared to $165,586 or 28% of sales for the six months ended
December 31, 1998. The percentage increase in store expenses in relationship to
sales is primarily attributed to the fact that the Company opened its third
store during June 1999 and incurred operational costs, additional set-up,
promotional, payroll and other expenses during the six-month period ended
December 31, 1999.
General and administrative expenses, which includes administrative salaries,
travel and entertainment, insurance and other expenses, were $300,581 or 45.9%
of sales for the six months ended December 31, 1999 as compared to $204,092 or
34.7% of sales for the six months ended December 31, 1998. The percentage
increase in relation to sales is primarily attributable to increases in public
relations, trade show expense, insurance and state tangible taxes associated
with the opening of a new store.
10
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO SIX MONTHS ENDED
DECEMBER 31, 1998 (CONTINUED)
The Company incurred interest expense for the six months ended December 31, 1999
of $285,660 as compared to interest expense of $10,000 for the six months ended
December 31, 1998. The increase is due to the amortization of the beneficial
conversion feature on the debentures payable of $251,281 and the amortization of
the discount on the warrants of $17,182.
As a result of the foregoing factors, the Company incurred losses of
approximately $684,000 or ($.02) per share for the six months ended December 31,
1999 as compared to a loss of approximately $195,000 or ($.01) per share for the
six month period ended December 31, 1998.
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED
DECEMBER 30, 1998
Net sales for the three months ended December 31, 1999 were $364,968, an
increase of 13.20% as compared to sales for the three months ended December 31,
1998 which were $322,447. This increase is attributable to the opening of a
third store. Net sales in the two store that were opened in both periods were
$245,949 for December 31, 1999 compared to $322,447, that is a decrease of
$76,498. This decrease is attributable to a temporary softening of the market
which has been influenced by the deep discount closeout cigars that are still in
the marketplace. The Company's management believes this to be a temporary
situation and the Company will continue to remain dedicated to importing name
brand products.
Cost of sales was $225,791 or 61.9% of sales for the three months ended December
31, 1999 as compared to $194,635 or 60.4% of sales for the three months ended
December 31, 1998.
Gross profit was $139,177 or 38.1% of sales for the three months ended December
31, 1999 as compared to gross profit of $127,812 or 39.6% of sales for the three
months ended December 31, 1998.
Store expenses, which include marketing and advertising expenses, rent and
salary costs, were $137,653 or 37.7% of sales for the three months ended
December 31, 1999 as compared to $61,762 or 19.2% of sales for the three months
ended December 31, 1998. The percentage increase in store expenses in
relationship to sales is primarily attributed to the fact that the Company
opened its third store during June 1999 and incurred operational costs,
additional set-up, promotional, payroll and other expenses during the
three-month period ended December 31, 1999.
General and administrative expenses, which includes administrative salaries,
travel and entertainment, insurance and other expenses, were $156,432 or 42.9%
of sales for the three months ended December 31, 1999 as compared to $127,928 or
39.7% of sales for the three months ended December 31, 1998. The percentage
increase in relation to sales is primarily attributable to increases in public
relations, trade show expense, insurance and state tangible taxes associated
with the opening of a new store.
The Company incurred interest expense for the three months ended December 31,
1999 of $62,067 as compared to interest expense of $5,000 for the three months
ended December 31, 1998. The increase is due to the amortization of the
beneficial conversion feature on the debentures payable of $44,872 and the
amortization of the discount on the warrants of $17,182.
11
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED
DECEMBER 30, 1998(CONTINUED)
As a result of the foregoing factors, the Company incurred losses of
approximately $282,000 or ($.01) per share for the three months ended December
31, 1999 as compared to a loss of approximately $144,003 or ($.01) per share for
the three month period ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had working capital of approximately
$1,090,000. Since its inception, it has incurred losses of approximately
$2,890,000. The Company's operations and growth has been funded by loans from
third parties, the sale of common stock through December 31, 1999 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, information systems development and other corporate
purposes.
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. The
Company believes, however, that additional funding will be necessary to expand
into markets outside of South Florida.
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. In addition the recent hurricane in
Nicaragua may affect the timely delivery of cigars. Therefore it is not possible
to predict whether the Company's investment in and agremment with Tabanica will
result in a stable and long-term supply of premium cigars.
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
its fiscal quarter ended December 31, 1999.
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: February 8, 2000 By: /S/
--------------------------
Steven Schatzman, President
13
<PAGE>
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
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
HAVANA REPUBLIC, INC. AND SUBSIDIARIES FORM 10-QSB FOR THE SIX MONTHS ENDED
DECEMBER 31,1999 FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 387,389
<SECURITIES> 0
<RECEIVABLES> 10,855
<ALLOWANCES> 0
<INVENTORY> 762,791
<CURRENT-ASSETS> 1,461,035
<PP&E> 781,375
<DEPRECIATION> 192,010
<TOTAL-ASSETS> 2,518,376
<CURRENT-LIABILITIES> 385,983
<BONDS> 0
0
760,906
<COMMON> 4,175,459
<OTHER-SE> (3,062,436)
<TOTAL-LIABILITY-AND-EQUITY> 2,518,376
<SALES> 655,027
<TOTAL-REVENUES> 655,027
<CGS> 366,142
<TOTAL-COSTS> 366,142
<OTHER-EXPENSES> 696,278
<LOSS-PROVISION> (407,393)
<INTEREST-EXPENSE> 285,660
<INCOME-PRETAX> (684,081)
<INCOME-TAX> 0
<INCOME-CONTINUING> (684,081)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (684,081)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
