10-Q 1 t23437.txt QUARTERLY REPORT 9/30/01 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, 2001 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.) 300 S.W. 1ST AVENUE, SUITE 108 FT. LAUDERDALE, FL 33301 (Address of principal executive offices) (Zip code) (954) 525-6333 (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 19, 2001: 64,069,423 shares of common stock, no par value per share. THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES INDEX PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheet (Unaudited) September 30, 2001....................................... 3 Consolidated Statements of Operations (Unaudited) For the Three Months Ended September 30, 2001 and 2000 . 4 Consolidated Statement of Changes in Shareholders' Equity For the Three Months Ended September 30, 2001............ 5 Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended September 30, 2001 and 2000... 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

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements. 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, 2001, 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, 2001 are not necessarily indicative of the results for the full fiscal year ending June 30, 2002. Note 2. INVENTORIES The major classes of inventories are as follows: SEPTEMBER 30, 2001 Cigars .....................................$ 238,893 Accessories..................................... 335,938 -------------- $ 574,831 ============== Note 3. SHAREHOLDERS' EQUITY In August 2001, the Company entered into an agreement for consulting services. Under the terms of this agreement, the consultant was issued 7,500,000 shares of common stock with a fair value of $75,000, for services to be provided over a one year period. At September 30, 2001, $64,000 is included in prepaid expenses and is being amortized over one year. During the quarter ended September 30, 2001, 40 shares of Series A Convertible Preferred Stock were converted into 6,698,642 shares of the Company's common stock and a fraction (.04%) of a share of Series C Convertible Preferred Stock was converted into 80,000 shares of the Company's common stock. Subsequent to the end of the quarter, (.02%) of a share of Series C Convertible Preferred Stock were converted into 600,000 shares of the Company's common stock. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2000 Sales for the three months ended September 30, 2001 were $257,010 an increase of approximately 4% as compared to sales for the three months ended September 30, 2000 which were $247,364. The Company believes the increase in sales was due to the positive results received from its Las Vegas emporium. Cost of sales was $100,921 or approximately 39.3% of sales for the three months ended September 30, 2001 as compared to $116,080 or approximately 47% of sales for the three months ended September 30, 2000. Gross profit was $156,089 or approximately 60% of sales for the three months ended September 30, 2001 as compared to gross profit of $138,284 or approximately 53% of sales for the three months ended September 30, 2000. The Company believes this increase is due the operations of its Las Vegas emporium which has higher profit margins. Store expenses, which include marketing and advertising expenses, rent and salary costs, were $87,992 or approximately 34 % of sales for the three months ended September 30, 2001 as compared to $121,764 or approximately 49 % of sales for the three months ended September 30, 2000. The Company attributes this reduction to the closing of the Weston, Florida emporium and the consolidation of expenses. General and administrative expenses, which includes administrative salaries, travel and entertainment, insurance and other expenses, were $160,345 or approximately 62 % of sales for the three months ended September 30, 2001 as compared to $171,577 or approximately 69% of sales for the three months ended September 30, 2000. As a result of the foregoing factors, the Company incurred a net loss applicable to common stock of $138,529 or ($.002) per share for the three months ended September 30, 2001 as compared to a loss of $202,329 or ($.01) per share for the three month period ended September 30, 2000. The Company believes that the decrease in its net loss is due to the sales generated by its Las Vegas Emporium and also the closing of its Weston, Florida emporium which closed on July 31, 2001. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2001, the Company had working capital of approximately $167,000. 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, 2001, the Company did not raise any money and no new securities were issued. The Company has had losses of approximately $6,260,000 since inception. During the three months ended September 30, 2001, the Company has experienced a reduction in working capital. The Company is seeking additional funding through Equity Financing. There can be no assurance that the Company will be able to obtain financing that is acceptable to the Company. These factors indicate that the Company may not be able to continue as a going concern. 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, 2001. 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 19, 2001 By: /S/ STEVEN SCHATZMAN -------------------------------- Steven Schatzman, President

HAVANA REPUBLIC INC/FL 10-Q