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 HAVANA REPUBLIC, INC. AND SUBSIDIARIES ~~INDEX~~CONSOLIDATED ~~PAGE~~BALANCE ~~PART~~SHEETS IASSETS September 30, 2001 June 30, 2001 CURRENT ASSETS: (Unaudited) Cash $ 82,867 $ 69,695 Inventory 574,831 644,803 Prepaid Expenses 71,610 30,000 ----------- ~~FINANCIAL~~----------- ~~INFORMATION~~Total ~~Item~~Current 1Assets 729,308 744,498 ----------- ~~Financial~~----------- ~~Statements~~PROPERTY ~~Consolidated~~AND ~~Balance~~EQUIPMENT, ~~Sheet~~at Cost (~~Unaudited~~Net of Accumulated Depreciation and Amortization of $316,805 and $283,658, respectively) ~~March~~884,722 31917,870 ~~2001~~----------- ~~...................................................................~~----------- 3OTHER ~~Consolidated~~ASSETS: ~~Statements~~Other of620 ~~Operations~~1,203 ~~(Unaudited)~~Deferred ~~For~~Income ~~the~~Tax ~~Three~~Asset, Net of Valuation Allowance of $1,530,000 and ~~Nine~~$1,100,000, ~~Months~~respectively ~~Ended~~-- ~~March~~-- 31----------- ----------- Total Other Assets 620 1,203 ~~2001~~----------- ~~and~~----------- ~~2000~~Total ~~......................~~Assets 4$ ~~Consolidated~~1,614,650 ~~Statement~~$ of1,663,571 ~~Changes~~=========== in=========== ~~Shareholders~~LIABILITIES AND SHAREHOLDERS' ~~Equity~~EQUITY ~~For~~CURRENT ~~the~~LIABILITIES: ~~Nine~~Accounts ~~Months~~Payable ~~Ended~~and ~~March~~Accrued 31Expenses $ 561,855 ~~2000~~$ ~~.........................................~~547,247 ----------- ----------- Total Current Liabilities 561,855 547,247 ----------- ----------- COMMITMENTS SHAREHOLDERS' EQUITY: Preferred Stock, No Par Value, Nonvoting, Authorized 5,000,000 ~~Consolidated~~Shares; ~~Statements~~Convertible ofPreferred ~~Cash~~Stock-Series ~~Flows~~A, Authorized 2,500 Shares: 169 and 209 shares, respectively issued and outstanding (~~Unaudited)~~Aggregate ~~For~~Liquidation ~~the~~Preference ~~Three~~of $ 228,150 and ~~Nine~~$ ~~Months~~282,150, ~~Ended~~respectively) ~~March~~234,327 31289,789 ~~2001~~Preferred Stock-Series B, Authorized 500,000 Shares: 200,000 shares issued and ~~2000~~outstanding ~~......................~~(Aggregate 6Liquidation ~~Notes~~Preference toof ~~Consolidated~~$100,000) ~~Financial~~40,000 ~~Statements~~40,000 Convertible Preferred Stock-Series C, Authorized 100 Shares: 89.66 and 89.~~.................................................~~70 7shares, ~~Item~~respectively 2issued -and ~~Management's~~outstanding ~~Discussion~~(Aggregate ~~and~~Liquidation ~~Analysis~~Preference of ~~Financial~~$ ~~Condition~~896,600 and ~~Results~~$897,000, ofrespectively) ~~Operations~~896,154 10896,602 ~~PART~~Convertible IIPreferred Stock-Series ~~OTHER~~D, ~~INFORMATION~~Authorized ~~Item~~50 1Shares: -50 ~~Legal~~shares ~~Proceedings~~issued ~~...................................................................~~and 13and ~~Item~~outstanding 4(Aggregate -Liquidation ~~Submission~~Preference of ~~Matters~~$ to500,000) a500,000 ~~Vote~~500,000 ofCommon ~~Security~~Stock, ~~Holders~~No ~~.................................~~Par 13Value, ~~Item~~Authorized 200,000,000 Shares; Issued and Outstanding 63,619,423 and 49,070,781 Shares and Additional Paid-in Capital 5,641,998 5,511,088 Accumulated Deficit (6,259,684) (6,121,155) ----------- ~~Exhibits~~----------- ~~and~~Total ~~Reports~~Shareholders' onEquity ~~Form~~1,052,795 81,116,324 -K---------- ~~....................................................~~----------- 13Total ~~Signatures~~Liabilities ~~...................................................................................~~and 13Shareholders' Equity $ 1,614,650 $ 1,663,571 =========== ===========

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

THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES CONSOLIDATED ~~BALANCE~~STATEMENTS ~~SHEETS~~OF ~~ASSETS~~OPERATIONS ~~March 31, 2001 June 30, 2000 CURRENT ASSETS: ..................................................................................~~ (Unaudited) ~~Cash~~For ~~.........................................................................................~~the $Three ~~128,101~~Months $Ended 995,017 Accounts Receivable .......................................................................... 3,892 15,680 Inventory .................................................................................... 875,951 635,209 Deposits on Inventory Purchases .............................................................. 75,000 150,000 ----------- ----------- ~~Total Current Assets ................................................................. 1,082,944 1,795,906~~ ----------- ----~~-------~~ ~~PROPERTY~~September ~~AND EQUIPMENT~~30,2001 atSeptember ~~Cost (Net of Accumulated Depreciation and Amortization of $362~~30,~~961~~ ~~and~~2000 ~~$256,537, respectively) ........................................ 989,754 716,728~~ ----------------- ------------------- ~~OTHER~~SALES ~~ASSETS:~~$ ~~Other ........................................................................................ 6~~257,~~868~~010 ~~8,117 Deposits on Inventory Purchases .............................................................. 422,675 347,675 Deferred Income Tax Asset, Net of Valuation Allowance of~~ $~~1,043,000~~ ~~and $867~~247,~~000,~~364 ~~respectively~~COST ~~.....................................................~~OF --SALES ~~-- Investments in 50% Owned Factory ............................................................. 50~~100,~~000~~921 50116,~~000~~080 ------------ ------------ ~~Total~~GROSS ~~Other~~PROFIT ~~Assets ................................................................... 479~~156,~~543~~089 ~~405~~131,~~792~~284 ------------ ------------ ~~Total~~OPERATING ~~Assets~~EXPENSES: ~~.........................................................................~~Store $Expenses 287,~~552,241~~992 ~~$ 2~~121,~~918,426~~764 ~~===========~~General ~~===========~~and ~~LIABILITIES~~Administrative ~~AND~~160,345 ~~SHAREHOLDERS'~~171,577 ~~EQUITY~~Depreciation ~~CURRENT LIABILITIES: Accounts Payable~~ and ~~Accrued~~Amortization ~~Expenses~~33,730 ~~........................................................~~32,535 $Professional ~~635~~Fees 12,~~756~~551 ~~$ 435~~21,~~440~~315 ------------ ------------ Total ~~Current~~Operating ~~Liabilities~~Expenses ~~............................................................ 635~~294,~~756~~618 ~~435~~347,~~440~~191 ------------ ----------- ~~COMMITMENTS SHAREHOLDERS' EQUITY: Preferred Stock, No Par Value, Nonvoting, Authorized 5,000,000 Shares; Convertible Preferred Stock~~-~~Series~~ A,LOSS ~~Authorized~~FROM ~~2,500~~OPERATIONS ~~Shares: 249 and 349 shares, respectively issued and outstanding~~ (~~Aggregate Liquidation Preference of $336~~138,~~150 and $ 471,150, respectively~~529) ~~............................................. 345,251 483,906 Preferred Stock-Series B, Authorized 500,000 Shares:200,000 shares issued and outstanding~~ (~~Aggregate Liquidation Preference of $100~~215,~~000~~907) ~~..................................... 40,000 40,000 Convertible Preferred Stock~~-~~Series~~----------- ~~C, Authorized 100 Shares: 90 shares issued and and outstanding (Aggregate Liquidation Preference of $ 900,000) .................... 900,000 900,000 Convertible Preferred Stock~~-~~Series~~----------- D,OTHER ~~Authorized 50 Shares~~INCOME: 50Interest shares issued and 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 42,957,443 and 34,901,073 Shares and Additional Paid-in- ~~Capital ... 5~~13,~~313,828~~578 4,968,173 Accumulated Deficit .......................................................................... (5,045,719) (4,272,218) Subscriptions Receivable ..................................................................... (136,875) (136,875) ------------ ------------ ~~Total~~-- ~~Shareholders' Equity ........................................................... 1~~13,~~916,485~~578 ~~2,482,986~~ ------------ ------------ ~~Total~~NET ~~Liabilities~~LOSS ~~and~~APPLICABLE ~~Shareholders'~~TO ~~Equity~~COMMON ~~...........................................~~STOCK $ 2(138,~~552,241~~529) $ 2(202,~~918,426~~329) ============ ============ ~~The~~NET ~~accompanying~~LOSS ~~notes~~PER ~~are~~COMMON anSHARE ~~integral~~- ~~part~~BASIC ofAND ~~these~~DILUTED ~~consolidated~~$ ~~financial~~-- ~~statements~~$ (0.01) ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -3- BASIC AND DILUTED 53,862,768 34,901,073 ============ ============

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

THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~OPERATIONS~~CHANGES ~~(Unaudited)~~IN SHAREHOLDERS' EQUITY For the ~~Nine~~Three Months Ended ~~For~~September ~~the~~30, ~~Three~~2001 ~~Months~~(Unaudited) ~~Ended~~Preferred Stock A Preferred Stock B Preferred Stock C --------------------- ------------ ---------- ----------------------~~---~~ ~~March~~Shares ~~31,~~Amount ~~2001~~Shares ~~March~~Amount ~~31,~~Shares ~~2000~~Amount ~~March 31, 2001 March 31, 2000~~ --------- ------ ----------------- ----------------- ----- ------------ ~~SALES~~BALANCE $- ~~900~~June 30,~~130~~ 2001 209 $ ~~970~~289,~~374~~789 200,000 $ ~~310~~40,~~257~~000 89.70 $ ~~315~~896,~~347~~602 ~~COST~~Issuance OFof ~~SALES~~common ~~371,713~~stock ~~511,934~~for ~~129,258~~services ~~145,792~~- - - - - - Conversion of preferred stock A to common stock (40) (55,462) - - - - Conversion of preferred stock C to common stock - - - - (0.04) (448) Net loss - - - - - -~~-----~~ ---------~~---~~ ------------ ~~GROSS PROFIT 528,417 458,440 180,999 169,555~~ ------------ ------------ ------------ ---------- BALANCE -- ~~OPERATING~~September ~~EXPENSES:~~30, ~~Store~~2001 ~~Expenses~~169 ~~403~~$ 234,~~092~~327 ~~419~~200,~~996~~000 ~~157~~$ 40,~~332~~000 ~~134~~89.66 $ 896,~~544~~154 ~~General~~========= ~~and~~=========== ~~Administrative~~=========== ~~698,673~~========== ~~443,743~~=========== ~~230,887~~========== ~~95,999~~Common ~~Depreciation~~Stock and ~~Amortization~~Additional ~~108,173~~Paid-in ~~94,582~~Preferred ~~40,664~~Stock ~~31,500~~D ~~Professional~~Capital ~~Fees~~Accumulated ~~119,375~~ -- ~~22,427~~ -- ------------ -------- ---- ------------ ------------ ~~Total~~Shares ~~Operating~~Amount ~~Expenses~~Shares ~~1,329,313~~Amount ~~958,321~~Deficit ~~451,310~~Total ~~262,043~~ ---------~~---~~ ------------- ------------- ------------- ~~LOSS FROM OPERATIONS (800,896) (499,881) (270,311) (92,488)~~ ------------ --~~----------~~ ------------- BALANCE -~~-----------~~ ~~OTHER~~June ~~INCOME~~30, ~~(EXPENSE):~~2001 ~~Interest~~50 ~~Income~~$ 27500,~~395~~000 1249,~~878~~070,781 4$ 5,~~746~~511,088 3$ (6,~~906~~121,155) ~~Interest~~$ ~~Expense~~1,116,324 Issuance of common stock for services - - ~~(302~~7,~~843)~~500,000 75,000 -- ~~(17~~75,~~183)~~000 Conversion of preferred stock A to common stock - - 6,968,642 55,462 - - Conversion of preferred stock C to common stock - - 80,000 448 - - Net loss - - - - (138,529) (138,529) ------------ ------------- ------------- ~~27,395 (289,965) 4,746 (13,277)~~ ------------- ------------ --~~----------~~ ------------- ~~NET~~BALANCE ~~LOSS~~- ~~APPLICABLE~~September TO30, ~~COMMON~~2001 ~~STOCK~~50 $ ~~(773~~500,~~501)~~000 63,619,423 $ ~~(789~~5,~~846)~~641,998 $ (~~265~~6,~~565~~259,684) $ ~~(105~~1,~~765)~~052,795 ============ ============ =~~===========~~ ============ ~~NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.02) $ (0.03) $ (0.01) $ (0.00)~~ =~~===========~~ ============ =~~===========~~ ============ ~~WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED 37,962,488 31,173,925 42,189,715 33,968,647~~ ==~~==========~~ ============ =~~=========== ============ 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 CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CHANGES~~CASH INFLOWS ~~SHAREHOLDERS'~~(Unaudited) ~~EQUITY~~ For the ~~Nine~~Three Months Ended ~~March 31, 2001 (Unaudited) Preferred Stock A Preferred Stock B Preferred Stock C~~ -------------------- -------------------- ~~--------------------~~September ~~Shares~~30, ~~Amount~~2001 ~~Shares~~September ~~Amount~~30, ~~Shares~~2000 ~~Amount~~ -------- ----------- --------- ---------- ~~---------~~CASH ~~---------~~FLOWS ~~BALANCE~~FROM -OPERATING ~~July~~ACTIVITIES: 1,Net ~~2000~~Loss ~~349~~ $ ~~483~~(138,~~906~~529) ~~200~~$(202,~~000~~329) $Adjustments ~~40,000~~to 90Reconcile $Net ~~900,000~~Loss ~~Issuance~~to ofNet ~~shares~~Cash ~~for~~(Used ~~services~~in) --Provided --by --Operating --Activities: --Depreciation --and ~~Conversion~~Amortization of33,730 ~~preferred~~32,535 ~~stock~~Common toStock ~~common~~Issued ~~stock~~in ~~(100)~~Exchange ~~(138,655)~~for --Services --75,000 -- --(Increase) ~~Net~~Decrease ~~loss~~in: ~~for~~Accounts ~~the~~Receivable ~~nine~~-- ~~months~~(1,541) ~~ended~~Inventory ~~March~~69,972 31(74,913) ~~2001~~Prepaid --Expenses --(41,609) -- --Increase --(Decrease) --in: ~~-----------~~Accounts ~~-----------~~Payable ~~-----------~~and ~~-----------~~Accrued Expenses 14,608 51,608 ----------- ----------- ~~BALANCE~~Net -Cash ~~March~~Provided ~~31,~~by ~~2001~~(Used ~~249~~in) $Operating ~~345,251~~Activities ~~200~~13,~~000~~172 ~~$ 40~~(194,~~000~~640) ~~90 $ 900,000 =========== =========== =========== =========== =========== =========== Common Stock and Additional Paid~~-~~in Preferred Stock D Capital~~ --------~~--------------~~ ---------~~-----------------~~ ~~Accumulated~~CASH ~~Subscriptions~~FLOWS ~~Shares~~FROM ~~Amount~~INVESTING ~~Shares~~ACTIVITIES: ~~Amount~~Acquisition ~~Deficit~~of ~~Receivable~~Property ~~Total~~and ~~---------~~Equipment --~~----------~~ ~~------------~~(16,328) ---------~~---~~ ---------~~----~~ ~~----------~~Net ~~-------------~~Cash ~~BALANCE~~(Used -in) ~~July~~Investing 1,Activities ~~2000~~-- ~~50 $ 500,000 34,901,073 $ 4,968,173 $~~(416,~~272,218~~328) ~~$ (136,875) $ 2,482,986 Issuance of shares for services~~ -- -- ~~3,450,000 207,000~~ -- -- ~~207,000 Conversion of preferred stock to common stock~~ -- -- ~~4,606,370 138,655~~ -- -- --- Net ~~loss~~Increase ~~for~~(Decrease) ~~the~~in ~~nine~~Cash ~~months~~13,172 ~~ended March 31~~(210,968) ~~2001~~Cash -- --Beginning --of --Year ~~(773~~69,~~501)~~695 ~~-- (773~~995,~~501)~~017 ----------- ----------- ~~-----------~~Cash -~~----------~~ ~~-----------~~End ~~---------~~of ~~----------~~Year ~~BALANCE - March 31, 2001 50~~ $ ~~500~~82,~~000~~867 ~~42,957,443~~ $ 5784,~~313,828~~049 ~~$(5,045,719) $ (136,875) $ 1,916,485~~ =========== =========~~== =========== =========== =========== ======================= 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

THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended ----------------------------------- March 31, 2001 March 31, 2000 ----------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(773,501) $(789,846) Adjustments to Reconcile Net Loss to Net Cash (Used in) Provided by Operating Activities: Depreciation and Amortization 107,673 94,582 Amortization of Beneficial Conversion Feature on Debentures and Notes -- 302,829 Common Stock Issued in Exchange for Services 207,000 46,572 (Increase) Decrease in: Accounts Receivable 11,788 (8,511) Inventory (240,742) 68,101 Other -- 30 Increase (Decrease) in: Accounts Payable and Accrued Expenses 200,316 (170,056) Net Cash (Used in) Operating Activities (487,466) (456,299) CASH FLOWS FROM INVESTING ACTIVITIES: Refund on Leasehold Improvements -- 73,640 Acquisition of Property and Equipment (379,450) (8,822) Net Cash Provided by (Used in) Investing Activities (379,450) 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 (866,916) (421,481) Cash - Beginning of Year 995,017 705,150 Cash - End of Year $ 128,101 $ 283,669 NONCASH INVESTING AND FINANCING ACTIVITIES: Issuance of Common Stock for Services $ -- $ 37,500 Recognition of Preferred Stock Dividend on Benficial Convserion Feature $ -- $ 600,000 The accompanying notes are an integral part of these consolidate financial statements.

Filing Compare · Delek Resources, Inc.