UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from ______________________ to _____________________
Commission file number
THE HAVANA GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 34-1454529
(State or other jurisdiction of (I.R.S. Employer incorporation or
organization) Identification No.)
</TABLE>
4450 Belden Village Street, N.W., Suite
406, Canton, Ohio 44718 (Address
of principle executive offices)
(Zip Code)
(330) 492-8090
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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 [ ]
As of August 10, 1999, there were 1,860,000 shares of the Registrant's
Common Stock $.001 par value issued and outstanding.
Transitional Small Business Disclosure Format.
Yes [ ] No [X]
<PAGE>
INDEX
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<CAPTION>
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheets - June 30, 1999 (Unaudited) and December 31, 1998...........................................3
Consolidated Statements of Operations (Unaudited) - Three Months and Six Months Ended June 30, 1999 and 1998............4
Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 1999 and 1998.............................5
Notes to Financial Statements...........................................................................................6
Item 2 - Management's Discussion and Analysis or Plan of Operations.....................................................9
Part II - Other Information.............................................................................................11
</TABLE>
<PAGE>
The Havana Group, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(UNAUDITED)
June 30, December 31,
1999 1998
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $1,190,311 $1,634,276
Accounts receivable 48,374 46,460
Inventories 675,969 500,765
Deferred catalog expense 105,670 32,772
Prepaid expenses 45,556 -
Total Current Assets 2,065,880 2,214,273
DEFERRED FEDERAL INCOME TAX 29,070 29,070
PROPERTY AND EQUIPMENT:
Leasehold Improvements 92,244 89,244
Machinery and equipment 9,473 15,781
Data Processing equipment 38,615 28,607
Web Site Development 120,712 -
Furniture and fixtures 18,735 16,863
279,779 150,495
Less accumulated depreciation 27,690 18,511
252,089 131,984
OTHER ASSETS, net of accumulated amortization
Customer lists 406,420 425,773
Other 2,014 2,222
408,434 427,995
$ 2,755,473 $ 2,803,322
========================= =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 248,067 139,302
Due to affiliates 47,582 200,602
Customer advances and other 1,336 2,395
Total Current Liabilities 296,985 342,299
STOCKHOLDERS' EQUITY:
Preferred stock 6,100 6,100
Common stock 1,860 1,860
Additional paid -in capital 6,459,322 6,459,322
Retained earnings (deficit) (4,008,794) (4,006,259)
Total Stockholders' Equity 2,458,488 2,461,023
$ 2,755,473 $ 2,803,322
========================= =======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
The Havana Group, Inc. and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Sales ............................... $ 309,163 $ 341,382 $ 570,927 $ 661,983
Cost of Sales ............................. 177,063 218,214 334,885 410,776
Gross Profit .............................. 132,100 123,168 236,042 251,207
Selling Expenses .......................... 93,238 108,756 175,018 212,551
General and Administrative
Expenses ............................ 85,240 99,561 163,973 186,527
(Loss) From Operations .................... (46,378) (85,149) (102,949) (147,871)
Other Income (Expense) .................... 84,044 (3,348,837) 100,415 (3,348,840)
Net Income (Loss) ......................... $ 37,666 ($3,433,986) ($ 2,534) ($3,496,711)
=========== =========== =========== ===========
Basic and Diluted Earnings (Loss) Per Share $ 0.02 ($ 2.38) ($ 0.00) ($ 2.86)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
The Havana Group, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(UNAUDITED)
Six Months Ended June 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss ................................................................................. ($ 2,534) ($3,496,711)
Adjustments to reconcile net loss to net cash used by operating activities:
Non-cash interest expense incurred on note conversion .............................. -- 3,350,000
Depreciation and amortization ...................................................... 28,740 24,477
(Increase) decrease in accounts receivable ......................................... (1,914) 2,360
(Increase) in inventories .......................................................... (175,204) (52,118)
(Increase) decrease in deferred catalog expense .................................... (72,898) 25,624
(Increase) in prepaid expenses ..................................................... (45,556) (5,186)
Increase (decrease) in accounts payable, customer advances and other ............... 107,706 (109,196)
Net cash (used) by operating activities (161,660) (260,750)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in property and equipment ..................................................... (129,284) (20,808)
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) Increase in due to affiliates ................................................. (153,020) 71,210
Increase in accrued offering costs ....................................................... -- 246,472
Sale of common stock ..................................................................... -- 1,917,282
Net cash (used) provided by financing activities (153,020) 2,234,964
Net (decrease) increase in Cash (443,964) 1,953,405
Cash - Beginning 1,634,276 79,611
Cash - Ending $ 1,190,311 $ 2,033,017
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE HAVANA GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Business Description and Principles of Consolidation
The Havana Group, Inc. (Havana) is in the mail order business and sells to
customers throughout the United States. The Company sells tobacco, cigars,
smoking pipes and accessories. Products are purchased from a variety of
manufacturers. The consolidated financial statements include the accounts of The
Havana Group, Inc., and its wholly-owned subsidiary, Monarch Pipe Company
(collectively, "the Company"). Monarch manufactures smoking pipes and sells them
exclusively to Havana. All significant inter-compan accounts and transactions
have been eliminated in consolidation
Note 2. Basis of Presentation
A. The accompanying unaudited financial statements have been prepared by
the Company. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of the Company's
management, the disclosures made are adequate to make the information presented
not misleading, and the consolidated financial statements contain all
adjustments necessary to present fairly the financial position as of June 30,
1999, the results of operations for the three month and six month periods ended
June 30, 1999 and 1998, and cash flows for the six month periods ended June 30,
1999 and 1998. The results of operations for the three and six month periods are
not necessarily indicative of the results to be expected for the full year.
Per Share Amounts - The number of shares outstanding in computing basic and
diluted earnings per shares for the three month and six month periods ended June
30, 1999 were 1,860,000; for 1998 the number of shares were 1,444,176 and
1,223,315 respectively.
B. Recently Issued Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133 - an amendment of FASB Statement No. 133," which
postponed the effective date of SFAS No. 133, "Accounting for Derivative
Financial Instruments and Hedging Activities," to all fiscal years beginning
after June 15, 2000. The Company does not anticipate having these types of
hedges, and the effect of adoption is expected to be immaterial.
The Accounting Standards Executive Committee issued Statement of
Position(SOP) 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," and SOP 98-5, "Reporting on the Costs of Start-Up
Activities," which are effective for years beginning after Dec. 31, 1998. The
Company's adoption of SOP 98-1 and SOP 98-5 had no material effect on its
results of operations or financial position.
Note 3. Agreement with Affiliated Company
Effective January 1, 1997, the Company contracted with Kids Stuff, Inc.
("Kids"), a subsidiary of Duncan Hill, Inc., to provide telemarketing, order
fulfillment, data processing and certain administrative functions. The Company
is charged for its portion of the expenses on a direct cost basis, as
applicable, or on a pro rata basis. Actual costs are those direct costs that can
be charged on a per order or per hour basis, fixed costs are allocated on a pro
rata basis by dividing the total assets of the Company by the sum of the total
assets of the Company and Kids. Effective January 1, 1998, the Company renewed
this contract with Kids at an annual cost of approximately $206,100 for the
administrative, executive and accounting services, and $2.40 per order
processed. The Company is also obligated to pay 5% of its 1998 pre-tax profit to
Kids in connection with these administrative and fulfillment services.
<PAGE>
At January 1, 1999 the agreement was modified and extended on a
month-to-month basis as the Company began to incur direct costs for its
administrative functions. The Company pays to Kids an accounting, data
processing, and administrative charge of $15,000 per year plus $1.75 per
shipment for warehouse services. The Company is also obliged to pay 5% of its
1999 pretax profits to Kids in connection with these services.
Through June 30, 1999, the Company's accounts receivable and inventories
are pledged as collateral on Kids line of credit, and the Company also acted as
a guarantor. In July 1999 the Company's liability was released as a part of a
general restructuring of the Kids line of credit. At June 30, 1999 the balance
on the line of credit was $762,000.
Note 4. Stockholders' Equity
Common Stock
The Havana Group, Inc. has 25,000,000 shares of $.001 par value common
stock authorized. In connection with a reorganization, the Company issued
1,000,000 common shares to its parent, Duncan Hill, Inc. The holders of Common
shares are entitled to one vote on all stockholder matters.
The Company is not currently subject to any contractual arrangements which
restricts its ability to pay cash dividends. The Company's Certificate of
Incorporation prohibits the payment of cash dividends on the Company's Common
Stock in excess of $.05 per share per year so long as any Serial Preferred Stock
remains outstanding unless all accrued and unpaid dividends on Serial Preferred
Stock has been set apart and there are no arrearages with respect to the
redemption of any Serial Preferred Stock.
In May 1998, the Company completed an initial public offering (see Note 7)
in which 460,000 units were sold. Each unit consisted of one common share and
two Class A warrants. In May 1998, the Company issued 400,000 common shares and
1,400,000 Class A warrants relative to a bridge loan conversion (see Note 4E).
B. Series A Preferred Stock
The Board of Directors has the authority to issue up to 10,000,000 shares
of Preferred Stock in one or more series and to fix all rights, preferences,
privileges, and restrictions. In December, 1997, the Company issued, as a
dividend to Duncan Hill, Inc., 5,000,000 shares of Series A Preferred Stock
(Series A) to Duncan Hill, Inc. The Series A holders are entitled to one vote
for each share held on all matters submitted to a vote of the stockholders. The
Series A stock is not subject to redemption and has no conversion rights or
rights to participate in dividend payments. In the event of any voluntary or
involuntary liquidation of the Company, each share of Series A stock has a
liquidation preference of $.001 per share.
C. Series B Preferred Stock
In December, 1997, the Company issued 1,100,000 shares of its Series B
Convertible Preferred Stock (Series B) to Duncan Hill. In return, Duncan Hill
assumed a $300,000 liability due to an affiliate. Series B has the same voting
privileges as the Common Stock. Each share of Series B stock is convertible into
one share of the Company's Common Stock at the option of either the holder or
the Company upon reaching net pre-tax earnings of at least $500,000. If declared
by the Board of Directors, Series B shareholders are entitled to receive
quarterly dividends of no more than $.025 per share, payable out of surplus or
net profits of the Company. As of August 9, 1999, the Board of Directors has not
declared any dividends. As the Series B Preferred pays a $.10 dividend per
share, the Company has recorded the Series B stock at $1.00 per share to reflect
its estimated fair value. The Series B stock is not subject to redemption. In
the event of a voluntary or involuntary liquidation of the Company, each share
of Series B stock has a liquidation preference of $.001, which is subordinated
to the liquidation preference of the Series A stock.
<PAGE>
D. Class A Warrants
As of June 30, 1999, the Company has 2,658,000 Class A Warrants
outstanding, which is comprised of 920,000 warrants included in the units sold
in the initial public offering (see Note 8); 1,400,000 warrants issued in
connection with the conversion of a note payable (see Note 4E); 138,000 warrants
issued to Duncan Hill in replacement of warrants issued in conjunction with a
reorganization; and 200,000 warrants issued to Mr. William Miller, the Company's
CEO.
Each Class A Warrant entitles the holder to purchase one share of common
stock at a price of $5.25 and expires May 2003. The Company may redeem the Class
A Warrants at a price of $.10 per warrant effective May 1999, upon not less than
30 days' prior written notice, if the closing bid price of the common stock has
been at least $10.50 per share for 20 consecutive trading days ending no more
that the 15th day prior to the date on which the notice of redemption is given
E. Issuance of Securities in Note Conversion
In January 1998, the Company borrowed $100,000 from a private investor in
exchange for a convertible promissory note (Convertible Note). The Convertible
Note bore interest at 8% per annum and was converted into 400,000 shares of
Common Stock and 1,400,000 warrants. The beneficial conversion feature (in the
amount of $3,350,000) of the note was recognized as additional paid-in capital
and charged to interest expense during 1998.
Note 5. Bridge Loan
In January 1998, the Company borrowed $100,000 from one private investor
evidenced by a promissory note of $100,000. This is the same private investor
mentioned in Note 4E, "Sale of Unregistered Securities." The note bore interest
at 8% per annum and was paid on May 22, 1998 out of proceeds of the Company's
initial public offering.
Note 6. Employment Agreement
In December 1997, the Company and its CEO entered into an employment
agreement, which among other terms, granted the CEO 200,000 Common Stock
Purchase Warrants at $6.00 per share. The warrants were converted into Class A
warrants upon the effectiveness of the Company's registration statement. The CEO
was also granted an option to purchase 200,000 shares of the Company's Common
Stock, which will vest 20% on each of the following dates: December 1, 1997;
January 1, 1998; January 1, 1999; January 1, 2000; and January 1, 2001,
regardless of whether the executive is employed on such dates by the Company.
The vested options will be immediately exercisable and will expire 10 years from
the date of the agreement. The exercise price of the options will be $6.00 per
share, subject to downward adjustments in the exercise price if the Company
meets certain performance goals.
At June 30, 1999 the Company and its CEO agreed to modify his employment
agreement. Pursuant to the modification, the CEO will receive 200,000 Class A
Warrants identical to the Class A Warrants issued to the public in May 1998 in
exchange for his waiver of base salary of $67,233 owed and accrued through June
30, 1999 and base salary of $25,000 for the period July 1, 1999 through December
31, 1999. The modification agreement will require the Company to register with
the Securities and Exchange Commission the resale of Mr. Miller's Class A
Warrants. See Note 4D for a description of the terms of the Class A Warrants.
The Company has entered into an employment agreement effective February 1,
1999 through December 31, 2002 with Gary J. Corbett whereby Mr. Corbett will
serve as the Company's President at an annual base salary of $80,000 plus bonus
to be determined by the Board of Directors. He was also granted options to
purchase 80,000 shares of the Company's common stock at an exercise price of
$3.50 per share subject to downward adjustments in the exercise price if the
Company meets certain performance goals. The options vest 25% on March 1, 1999
and 25% on each of the first, second, and third anniversary dates of the
employment agreement.
<PAGE>
Note 7. Public Offering
In May 1998, the Company completed an initial public offering in which
460,000 units were sold for $2,760,000. In connection with the initial public
offering, the Company incurred issuance costs of $842,718. Each unit consisted
of one common share and two Class A warrants and sold for $6.00 per unit. The
common stock and warrants are separately transferable. During June 1998, an
additional 69,000 units were sold by Duncan Hill as the over-allotment of the
Company's initial public offering. A portion of the proceeds of the public
offering was used to pay off the bridge loan and increase inventory levels and
working capital.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This discussion should be read in conjunction with the information in the
financial statements of the Company and notes thereto appearing elsewhere.
Overview
The Havana Group, Inc. is a consumer catalog business specializing in
smoking pipes, tobaccos, cigars and related accessories. We are the manufacturer
and sole distributor of the "Magic Inch" and "Aerosphere" smoking pipe systems,
and the sole distributor of "Carey Honduran" lines of proprietary hand made
cigars. Our products are offered through our Carey's Smokeshop catalog. Carey
Tobacco Club is also offered through the catalog, which is a monthly program of
tobacco shipments to Club members. During December 1997 we opened, and have
since been developing, our Havana Group retail store.
On May 14, 1998, the Securities and Exchange Commission declared our
initial public offering effective, and it was subsequently completed on May 22,
1998. Proceeds from that offering amounted to $1,917,282, net of expenses of
$842,718.
During the six months ended June 30, 1998, catalog sales provided about 71%
of gross revenues, Club member sales comprised another 20%, and the balance was
provided by the developing retail store.
RESULTS OF OPERATIONS
Three months ended June 30, 1999 compared to the three months ended June
30, 1998.
Net sales for the quarter ended June 30, 1999 were $309,163, a decline of
9.4% from the $341,382 for the same quarter last year. We redesigned the Carey
catalog and expanded its offerings. The catalog introduction was delayed until
June 28, 1999, about a month later than planned, which resulted in the revenue
loss.
Cost of sales decreased from 63.9% of net sales in 1998 to 57.3% in 1998.
The change was due to a one-time charge in 1998 to cigar inventory. Selling
expenses remained essentially the same at 30.2% of net sales in 1999 compared
with 31.9% in 1998. For the second quarter 1999, general and administrative
expenses were $85,240, or 27.6% of sales, as compared to $99,561, or 29.2% of
sales, for the same period last year.
The operating loss for the second quarter of 1999 was $46,378, or 15.0% of
sales, as compared to an operating loss of $85,149, or 24.9% of sales, for the
same quarter last year. The change was due primarily a 6.6% improvement in cost
of sales.
Other income in the quarter ended June 30, 1999 of $84,044 included the
cancellation of a liability of $67,233 associated with the restructuring of the
employment agreement of the Company's CEO. See Financial Statement Note 6.
During the second quarter of 1998 we incurred a one-time non-cash interest
charge of $3,350,000 due to the accounting treatment of the beneficial
conversion feature of a $100,000 convertible promissory note. On May 14, 1998,
the note was converted into 400,000 Common Stock shares and 1,400,000 Class A
warrants of the Company. See Note 4E, "Sale of Unregistered Securities", in the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
As a result of the accounting for the beneficial conversion feature, the
net loss for the second quarter of 1998 amounted to $3,433,986. Net income for
the second quarter of 1999 was $37,666.
Six months ended June 30, 1999 compared to six months ended June 30, 1998.
Net sales for the six months ended June 30, 1999 were $570,927, a decrease
of 13.8% from sales of $661,983 for the same period in 1998. The decrease is
attributable to reduced catalog circulation resulting from a general catalog
redesign and scheduling delays.
Cost of sales decreased from 62.1% of net sales in 1998 to 58.7% in 1999.
The change was due to a one-time charge in 1998 to cigar inventory. Selling
expenses remained essentially the same at 30.7% of net sales in 1999 compared
with 32.1% in 1998.
<PAGE>
For the six months ended June 30, 1999, general and administrative expenses
amounted to $163,973, or 28.7% of net sales, as compared to $186,527, or 28.2%
of net sales for the same period last year.
The operating loss before other expense for the first six months of 1999
was $102,949, or 18.0% of net sales, as compared to an operating loss of
$147,871, or 22.3% of net sales for the same period last year. The reduction in
operating losses as a percentage of sales was due primarily to improved cost of
sales ratios. Other income in the six months ended June 30, 1999 of $100,415
included the cancellation of a liability of $67,233 associated with the
restructuring of the employment agreement of the Company's CEO. See Financial
Statement Note 6.
As a result of the accounting for the beneficial conversion feature
previously discussed, the net loss for the six months ended June 30, 1998
amounted to $3,496,711, compared with a loss of $2,534 for the six months ended
June 30, 1999.
Liquidity and Capital Resources
At June 30, 1999, our accumulated deficit increased to $4,008,794 from
$4,006,259 at December 31, 1998 because of the net loss. In addition to the net
loss of $2,524, cash was used by operating activities primarily to increase
inventories by $175,204, increase deferred catalog mailing expenses by $72,898,
and increase prepaid expenses by $45,556. Cash uses were marginally offset by
non-cash charges of $28,740 for depreciation and amortization as well as an
increase in accounts payable, customer advances and other of $107,706. A total
of $120,720 in cash was used as an investment in our new web site. Cash flows
used for financing amounted to $153,020, as we paid this amount to decrease
amounts due affiliates for services under our operating agreement with Kids
Stuff, Inc..
At June 30, 1998, our accumulated deficit increased $3,496,711 from
December 31, 1997 because of the net loss. In addition to the net loss, cash was
used by operating activities primarily to reduce accounts payable and to
increase inventories. Cash uses were marginally offset by non-cash charges of
$24,477 for depreciation and amortization as well as a decrease in deferred
catalog costs of $25,624. Cash was provided by financing activities primarily as
a result of our initial public offering completed May 22, 1998. In addition,
amounts due affiliates increased $71,210 representing the net amount due under
the support services agreement with Kids Stuff.
Currently, the Company has no credit facility. However, we have pledged our
assets as guarantee on Kids Stuff's bank line of credit. This is a credit line
of $800,000 with an outstanding balance of $762,000 at June 30, 1999. We were
relieved of this liability in July 1999 as a part of a general restructuring of
the bank loans to Kids Stuff, Inc.
The Company expects to meet current cash requirements from the working
capital provided by the IPO and ongoing operations.
Forward Looking Statements and Associated Risks
Management's discussion and analysis contains forward looking statements
which reflect Management's current views and estimates of future economic
circumstances, industry conditions, company performance and financial results.
These forward looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, many of which are beyond
the Company's control. Actual results could differ materially from these forward
looking statements as a result of changes in the trends in the tobacco or cigar
retail and mail order industry, government regulations imposed on the tobacco
industry, competition, availability and price of goods, credit availability,
printers' schedules and availability, and other factors. Any changes in such
assumptions or factors could produce significantly different results.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed as part of this report:
27. Financial Data Schedule
(b) No report on form 8-K was filed during the second quarter of 1999.
<PAGE>
Signature
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
The Havana Group, Inc.
Date: 8/16/99 /s/ William Miller
William Miller, CEO
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
FINANCIAL DATA SCHEDULE THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS AND RELATED FOOTNOTES
THERETO, OF THE HAVANA GROUP, INC. AND SUBSIDIARY.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> dec-31-1999
<PERIOD-END> jun-30-1999
<CASH> 1,190,311
<SECURITIES> 0
<RECEIVABLES> 53,374
<ALLOWANCES> 5,000
<INVENTORY> 675,969
<CURRENT-ASSETS> 2,065,880
<PP&E> 279,779
<DEPRECIATION> 27,690
<TOTAL-ASSETS> 2,755,473
<CURRENT-LIABILITIES> 296,985
<BONDS> 0
0
6,100
<COMMON> 1,860
<OTHER-SE> 2,450,528
<TOTAL-LIABILITY-AND-EQUITY> 2,755,473
<SALES> 570,927
<TOTAL-REVENUES> 570,927
<CGS> 334,885
<TOTAL-COSTS> 509,903
<OTHER-EXPENSES> 163,973
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,534)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,534)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,534)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
