SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, 1999

Commission File Number: 333-40799

                            THE HAVANA REPUBLIC, INC.
           (name of small business issuer as specified in its charter)

      Florida                                               84-1346897
(State or Other Jurisdiction of                (IRS Employer Identification No.)
Incorporation or Organization)

                       1360 WESTON ROAD, WESTON, FL 33326
             (Address and Zip Code of Principal Executive Offices)

Issuer's Telephone Number: (954) 384-6333

Securities Registered Under Section 12(b) of the Exchange Act: None

Securities Registered Under Section 12(g) of the Exchange Act: Common Stock, no
par value.

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [ ]

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year: $1,177,674


<PAGE>


         The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of September 27, 1999 was approximately
$2,275,000. Solely for purposes of the foregoing calculation, all of the
registrant's directors and officers are deemed to be affiliates.

There were 30,076,693 shares of the registrant's common stock outstanding as of
September 27, 1999.




<PAGE>

                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES


                        CONSOLIDATED FINANCIAL STATEMENTS







                                    CONTENTS


                                                                           Page

Report of Independent Certified Public Accountants............................2

Financial Statements:

  Consolidated Balance Sheet..................................................3

  Consolidated Statements of Operations.......................................4

  Consolidated Statements of Changes in Shareholders' Equity..................5

  Consolidated Statements of Cash Flows.......................................6

  Notes to Consolidated Financial Statements...............................7-16










                                       -1-

<PAGE>





To the Board of Directors
The Havana Republic, Inc. and Subsidiaries
Weston, Florida



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have audited the accompanying consolidated balance sheet of The Havana
Republic, Inc. (a Colorado corporation) and Subsidiaries as of June 30, 1999 and
the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Havana Republic, Inc. and Subsidiaries as of June 30, 1999, and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.




West Palm Beach, Florida
September 22, 1999










                                       -2-

<PAGE>

                       CONSENT OF INDEPENDENT ACCOUNTANTS



         We consent to the inclusion in this annual report on Form 10-KSB of our
report dated September 22, 1999, on our audit of the consolidated financial
statements of The Havana Republic, Inc. and Subsidiaries. We also consent to the
reference to our firm under the caption "Experts".







Butner & Kahle, CPAs, PA
West Palm Beach, Florida
September 22, 1999




                                      -3-
<PAGE>




                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 June 30, 1999
<TABLE>
<CAPTION>


                                     ASSETS


CURRENT ASSETS:
<S>                                                                     <C>
     Cash                                                               $   705,150
     Accounts Receivable                                                      5,960
     Inventory                                                              775,362
     Deposits on Inventory Purchases                                        300,000
                                                                        -----------

          Total Current Assets                                            1,786,472
                                                                        -----------

PROPERTY AND EQUIPMENT, at Cost (Net of Accumulated Depreciation  and
     Amortization of $130,010)                                              908,193
                                                                        -----------

OTHER ASSETS:
     Other                                                                   10,478
     Deposits on Inventory Purchases                                        216,600
     Investments in 50% Owned Factory                                        50,000
                                                                        -----------

          Total Other Assets                                                277,078
                                                                        -----------

          Total Assets                                                  $ 2,971,743
                                                                        ===========


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts Payable                                                   $   273,258
     Accrued Expenses                                                       195,602
     Deferred Membership Revenue                                             11,695
     Current Portion of Note and Debentures Payable                         190,653
                                                                        -----------

          Total Current Liabilities                                         671,208
                                                                        -----------

Note and Debentures Payable, Less Current Portion                           224,098
                                                                        -----------


COMMITMENTS

SHAREHOLDERS' EQUITY:
     Preferred Stock, No Par Value,
          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 June 30, 1999)                     720,906
          Preferred Stock-Series B, Authorized 200,000 Shares:
               200,000 shares issued and outstanding
               (Aggregate Liquidation Preference of $100,000
               at June 30, 1999)                                             40,000
     Common Stock, No Par Value, Authorized 50,000,000 Shares;
          Issued and Outstanding 28,276,693 Shares                        3,771,386
     Accumulated Deficit                                                 (2,241,480)
     Subscriptions Receivable                                              (214,375)
                                                                        -----------


          Total Shareholders' Equity                                      2,076,437
                                                                        -----------


          Total Liabilities and Shareholders' Equity                    $ 2,971,743
                                                                        ===========

</TABLE>


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



                                      -4-
<PAGE>



                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                         For the Year Ended
                                                  ------------------------------
                                                  June 30, 1999    June 30, 1998
                                                  ------------------------------

SALES
<S>                                                <C>             <C>
     Retail Sales                                  $  1,162,805    $    581,113
     Memberships                                         14,869          14,177
                                                   ------------    ------------

          Net Sales                                   1,177,674         595,290

COST OF SALES                                           623,458         359,111
                                                   ------------    ------------

GROSS PROFIT                                            554,216         236,179

OPERATING EXPENSES:
     Store Expenses                                     512,123         249,014
     General and Administrative                         366,780         499,268
     Depreciation and Amortization                       76,965          43,800
     Professional Fees                                  104,547         202,538
                                                   ------------    ------------

          Total Operating Expenses                    1,060,415         994,620
                                                   ------------    ------------

LOSS FROM OPERATIONS                                   (506,199)       (758,441)
                                                   ------------    ------------

OTHER INCOME (EXPENSE):
     Interest Income                                     27,136          24,352
     Interest Expense                                   (38,335)        (23,431)
                                                   ------------    ------------
                                                        (11,199)            921
                                                   ------------    ------------

LOSS BEFORE PROVISION FOR INCOME TAXES                 (517,398)       (757,520)

PROVISION FOR INCOME TAXES                                 --              --
                                                   ------------    ------------

NET LOSS                                           $   (517,398)   $   (757,520)
                                                   ============    ============

BASIC AND DILUTED NET LOSS PER COMMON SHARE        $      (0.02)   $      (0.14)
                                                   ============    ============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING        20,931,505      10,101,541
                                                   ============    ============

</TABLE>



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



                                      -5-
<PAGE>

                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                   For the Year Ended June 30, 1999 and 1998

<TABLE>
<CAPTION>




                                             Preferred Stock A & B        Common Stock        Accumulated  Subscription
                                             ---------------------     -------------------    -----------  ------------
                                              Shares       Amount      Shares       Amount      Deficit     Receivables     Total
                                              ------       ------      ------       ------      -------     -----------     -----

<S>                                          <C>         <C>         <C>          <C>        <C>           <C>            <C>
BALANCE -  June 30, 1997                        --       $     --     9,121,00   $1,138,070    $(266,562)     $    --    $  871,508

Shares issued in connection with offering       --             --       38,460       50,000          --            --        50,000

Issuance of preferred stock series A           2,100      1,883,450        --            --          --            --     1,883,450

Issuance of preferred stock series B          50,000         25,000        --            --          --            --        25,000

Recognition of preferred stock dividend for
     beneficial conversion feature              --          700,000        --            --     (700,000)          --           --

Conversion of preferred stock series A        (1,120)    (1,377,840) 7,922,581    1,377,840          --            --           --

Issuance of common shares in exchange for
     services                                   --             --      285,000      202,970          --            --       202,970

Issuance of common shares in exchange for
     future services                            --             --      734,025      137,630          --      (137,630)         --

Net loss for the year ended June 30, 1998       --             --          --            --     (757,520)         --       (757,520)
                                             -------    ----------  ----------   -----------  ----------   -----------   ----------

BALANCE -  June 30, 1998                      50,980    $1,230,610  18,101,066   $2,906,510  $(1,724,082)  $ (137,630)   $2,275,408

Conversion of preferred stock series A          (394)     (484,704)  9,425,627      484,704          --            --           --

Revaluation of common shares issued in
     exchange for for future services           --             --          --       (35,000)         --        35,000           --

Construction services rendered for
     subscriptions receivable                   --             --          --           --           --         8,255         8,255

Preferred shares series B issued to pay
     accrued salaries                         15,000        15,000         --            --          --            --        15,000

Common shares issued for future services        --             --      750,000      120,000          --      (120,000)          --

Beneficial interest relating to warrants
    and convertible debentures                  --             --          --       295,172          --            --       295,172

Net loss for the year ended June 30, 1999       --             --          --            --     (517,398)          --      (517,398)
                                             -------    ----------  ----------  -----------  -----------  -----------   -----------

BALANCE - June 30, 1999                      200,586    $  760,906  28,276,693  $ 3,771,386  $(2,241,480) $  (214,375)  $ 2,076,437
                                             =======    ==========  ==========  ===========  ===========  ===========   ===========

</TABLE>

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




                                      -6-
<PAGE>




                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                                       For the Year Ended
                                                                                  -----------------------------
                                                                                  June 30, 1999  June 30, 1998
                                                                                  -----------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                               <C>            <C>
     Net Loss                                                                     $  (517,398)   $  (757,520)
     Adjustments to Reconcile Net Loss to Net Cash Used in
          Operating Activities:

          Depreciation and Amortization                                                74,634         43,800
          Common Stock Issued in Exchange for Services                                   --          157,970
          Preferred Stock Issued in Exchange for Services                                --           25,000
          Amortization of Beneficial Conversion Feature on Debentures and Notes        19,270           --

          (Increase) Decrease in:
               Accounts Receivable                                                     (4,379)            87
               Inventory                                                               (1,949)      (295,559)
               Prepaid Expenses and Other                                              40,257          4,743
               Deposits on Inventory Purchases                                        100,100       (175,000)
               Other                                                                    2,331         20,170

           Increase (Decrease) in:
               Accounts Payable                                                       120,422         55,039
               Accrued Expenses                                                       105,549         63,614
               Deferred Membership Revenue                                              6,911        (14,358)
               Due to Related Party                                                      --             (750)
                                                                                  -----------    -----------

                    Net Cash Used in Operating Activities                             (54,252)      (872,764)
                                                                                  -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of Property and Equipment                                           (533,374)      (277,857)
                                                                                  -----------    -----------

                    Net Cash Used in Investing Activities                            (533,374)      (277,857)
                                                                                  -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from Issuance of Common Stock                                              --           50,000
     Proceeds from Issuance of Preferred Stock Series A                                  --        1,883,450
     Repayment of Note Borrowings                                                        --         (209,347)
     Proceeds from Issuance of Debentures                                             500,000           --
                                                                                  -----------    -----------

                    Net Cash Provided by Financing Activities                         500,000      1,724,103
                                                                                  -----------    -----------

Net Increase (Decrease) in Cash                                                       (87,626)       573,482

Cash - Beginning of Year                                                              792,776        219,294
                                                                                  -----------    -----------

Cash - End of Year                                                                $   705,150    $   792,776
                                                                                  ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash Paid during the Year for Interest                                       $      --      $    26,653
                                                                                  ===========    ===========
     NONCASH INVESTING AND FINANCING ACTIVITIES:
     Issuance of Common Stock for Services                                        $    85,000    $   182,630
                                                                                  ===========    ===========
     Recognition of Preferred Stock Dividend on Beneficial Conversion             $      --      $   700,000
                                                                                  ===========    ===========

     Issuance of Preferred Stock-Series B for Services                            $    15,000    $    25,000
                                                                                  ===========    ===========

     Beneficial Interest Relating to Warrants and Convertible Debentures          $   295,172    $      --
                                                                                  ===========    ===========

     Conversion of Preferred Stock to Common Stock                                $   484,704    $      --
                                                                                  ===========    ===========
     Construction Services Rendered for Subscription Receivable                   $     8,255    $      --
                                                                                  ===========    ===========

</TABLE>

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



                                      -7-
<PAGE>





                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization, Capitalization and Reverse Acquisition

The Havana Republic, Inc. (Colorado) (The "Colorado Company") was organized
under the laws of the State of Colorado on May 31, 1995. The Colorado Company is
authorized to issue 50,000,000 shares of its no par common stock and 5,000,000
shares of its no par value preferred stock.

The Havana Republic, Inc. (Florida) (The "Florida Company") was organized under
the law of the State of Florida on March 10, 1996. The Florida Company's
articles of incorporation provide for the issuance of 1,000 shares of its no par
value common stock.

On June 17, 1996 all of the issued and outstanding stock of the Florida Company
was exchanged for 5,500,000 shares of common stock of the Colorado Company. The
Colorado Company and the Florida Company are hereinafter referred to
collectively as the Company. As a result of the exchange of stock, the former
stockholders of the Florida Company owned approximately 79% of the common stock
of the Company. Accordingly, this transaction had been treated, for financial
reporting purposes, as a reverse acquisition in which the Florida Company was
recapitalized by providing 5,500,000 shares of the Colorado Company to its
existing shareholders. The 1,574,000 shares held by the Colorado Company
shareholders before the acquisition were issued in June 1996 pursuant to an
offering in accordance with Rule 504 of Regulation D pursuant to Securities Act
of 1933, the proceeds of such offering were approximately $3,000. At the time of
the recapitalization, the Colorado Company had no assets and no value was
attributable to such shares.

Business

The Company is engaged in the business of owning and operating upscale cigar
emporiums devoted to the sale of premium cigars and cigar related merchandise.
In addition, the Company has developed its own brand name cigar for sale to the
wholesale and retail markets.

Principles of Consolidation

The consolidated financial statements include the accounts of The Havana
Republic, Inc. and its wholly owned Subsidiaries. All significant intercompany
transactions and balances have been eliminated from these consolidated financial
statements.

Fair Market Value of Financial Instruments

The carrying amount reported in the consolidated balance sheet for cash and cash
equivalents, note payable, accounts payable and accrued liabilities approximates
fair market value due to the immediate or short-term maturity of these financial
instruments.





                                      -8-
<PAGE>




                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period to prepare these consolidated financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates and assumptions.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentration of
credit risk, consist principally of cash and cash equivalents. The Company
places its cash in money market funds with high credit quality institutions. As
of June 30, 1999, the Company had $655,281 in one financial institution with the
excess over $100,000 not covered by FDIC insurance and which, therefore, did not
limit the Company's amount of credit risk. The Company has not experienced any
losses in such account and believes that it is not exposed to any significant
credit risk on the account.

Inventory

Inventory consisting principally of cigars and accessories, is valued at the
lower of cost (first-in, first-out) or market.

Deposits on Inventory Purchases

Deposits on inventory purchases consist of payments to the Company's 50% owned
affiliate to secure the purchase of cigar inventory. All transactions are in
U.S. dollars. As of June 30, 1998, the Company had not received any cigars from
the 50% owned affiliate. The postponement in delivery of the cigars was due to
the delay in the opening of the Company's Fort Lauderdale store and issues
regarding the Company's cigar label. The Company began receiving shipments of
cigars in January 1999. During the year ended June 30, 1999, the Company
received approximately 50,000 cigars for $50,000 and also received a cash refund
from the factory for $50,000. Accordingly, as of June 30, 1999, the Company has
deposits on inventory purchases amounting to $516,600. The Company will continue
to receive shipments of these cigars and expects to receive approximately 25,000
cigars per month during fiscal 2000. However, a deposit on inventory purchases
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 deposit.






                                      -9-
<PAGE>





                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

For the purpose of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided over the
estimated useful lives of the respective assets using the straight-line method
for financial reporting purposes and the accelerated method for income tax
purposes. Maintenance, repairs, and minor renewals are charged to expense as
incurred while expenditures that materially increase values, change capacities,
or extend useful lives are capitalized. Upon sale or retirement of property and
equipment, the cost and the related accumulated depreciation are eliminated from
the respective accounts and the resulting gain or loss is included in
operations.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities or a
change in tax rate is recognized in income in the period that includes the
enactment date. Deferred tax assets are reduced to estimated amounts to be
realized by use of a valuation allowance.

The principal types of temporary differences between assets and liabilities for
financial statement and tax return purposes are net operating loss
carryforwards.

Loss per Common Share

The Company uses Statement of Financial Accounting Standard No. 128-Earnings per
Share ("FAS 128") which requires the dual presentation of basic and diluted
earnings per share. Basic earnings per share is computed by dividing net income,
after deducting preferred stock dividends accumulated during the period, by
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
potentially dilutive securities outstanding during each period. Diluted loss per
common share is not presented because it is anti-dilutive. For the year ended
June 30, 1998, net loss has been adjusted for deemed dividends on the
convertible preferred stock amounting to $700,000 to arrive at net loss
available to common shareholders.




                                      -10-
<PAGE>



                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)







NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition

Revenues from product sales are recognized when the customer purchases the
product. The Company also sells three types of annual smoking club memberships
ranging in price from $250 to $750. Revenue from membership is recognized over a
12-month period from purchase date. The Company has deferred membership revenue
amounting to $11,695 and $4,784 as of June 30, 1999 and 1998, respectively.

Recent Accounting Pronouncements

In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair value. SFAS No. 133
is effective for years beginning after June 15, 1999 and may be implemented as
of the beginning of any fiscal quarter after June 15, 1998.

The effect of adopting SFAS 133 is not expected to be material to the Company's
consolidated financial statements or notes to consolidated financial statements.


NOTE 2 - INVESTMENT IN 50% OWNED FACTORY

The Company invested $50,000 in January 1997 for a 50% interest in a company
owning a factory located in Jalapa, Nicaragua. The Company has the right to
purchase cigars from the factory at cost plus 50% through October 31, 2001.
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. The investment is
being carried at cost, which based on the limited information available, the
Company believes that the financial statements would not be materially different
than if carried on the equity method.








                                      -11-
<PAGE>


                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 3 - PROPERTY AND EQUIPMENT

The major classifications of property and equipment at June 30, 1999 are as
follows:

    Computers and software                                  $     13,921
     Furniture and fixtures                                      163,373
     Office equipment                                             58,937
     Leasehold improvements                                      801,972
                                                            ------------
                                                               1,038,203
    Accumulated depreciation                                    (130,010)
                                                            ------------
                                                            $   908,193
                                                            ===========

Depreciation expense amounted to $74,634 and $41,469 for the years ended June
30, 1999 and 1998, respectively.

NOTE 4 - INVENTORY

The major classes of inventory at June 30, 1999 are as follows:

     Cigars                                                $   390,952
     Accessories                                               384,410
                                                           -----------

                                                           $   775,362
                                                           ===========
NOTE 5 - NOTE AND DEBENTURES PAYABLE

At June 30, 1999, note and debentures payable consisted of the following:

Note payable - third party. Interest shall accrue at a rate equal to ten percent
(10%) simple interest per annum. As of June 30, 1999, the Company owed the third
party $190,653. Subsequent to year-end, the Company repaid the note through the
issuance of 2,400,000 common shares (which includes 600,000 shares returned as
described in note 8) and the payment of $30,000 in cash.

$ 190,653

8% convertible debentures (net of original issue discount of $275,902).
See (a) below.
                                                                 224,098
                                                           -------------
                                                                 414,751

Less: current maturities                                        (190,653)
                                                           -------------
                                                           $     224,098
                                                           =============



                                      -12-
<PAGE>




                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 5 - NOTE AND DEBENTURES PAYABLE (Continued)

 (a) 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. $1,321 has been
amortized during the year ended June 30, 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 June 30, 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.

Long-term debt maturing at June 30 for the next five years and thereafter is as
follows:

          2000                                        $  190,653
          2002                                           224,098
                                                      ----------

                                                      $  414,751
                                                      ==========

NOTE 6 - INCOME TAXES

To date, the Company has incurred tax operating losses and therefore, has
generated no income tax liabilities. As of June 30, 1999, the Company has
generated net operating loss carryforwards totaling approximately $1,417,000,
which are available to offset future taxable income, if any, through 2020. As
utilization of such an operating loss for tax purposes is not assured, the
deferred tax asset has been fully reserved through the recording of a 100%
valuation allowance.



                                      -13-
<PAGE>



                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





NOTE 6 - INCOME TAXES (Continued)

As of June 30, 1999, the components of the net deferred tax asset are as
follows:

    Deferred Tax Assets:
         Net operating loss carryforward                        $   547,000
         Valuation allowance                                       (547,000)
                                                                -----------


          Net deferred tax                                     $    --
                                                               ============


NOTE 7 - COMMITMENTS

Operating Leases

The Company has operating leases for store facilities expiring through 2002 to
2004. The lease agreements require the Company to pay real estate taxes,
maintenance and other operating expenses associated with the space leased and is
personally guaranteed by the officers of the Company. The store leases also
provide for additional contingent rentals based upon a percentage of sales in
excess of certain minimum amounts, as well as increases in the consumer price
index. Total rent expense for the year ended June 30, 1999 and 1998 amounted to
$185,242 and $57,545, respectively.

Future minimum rental commitments as of June 30, 1999 are as follows:

         2000                                        $     191,724
         2001                                              192,723
         2002                                              182,239
         2003                                              155,600
         2004                                               84,160
         Thereafter                                        439,736
                                                     -------------

                                                     $   1,246,182
                                                     =============

Employment Agreements

In May 1997, the Company entered into employment agreements with officers of the
Company. The terms of the two employment, which expire on December 31, 2001,
provide for initial annual base salary of $80,000 with additional increases,
bonuses and compensation to be decided by the Board of Directors.






                                      -14-
<PAGE>


                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 8 - STOCKHOLDERS' EQUITY

Common Stock

In August 1997, the Company sold 38,460 shares at $1.30 per share pursuant to an
offering in accordance with Rule 504 of Regulation D pursuant to Securities Act
of 1933.

In November 1997, the Company issued 644,026 and 90,000 common shares valued at
a fair market value of $1.17 per share for future construction services rendered
in connection with the construction of leased premises housing the Company's
future stores and printing services, respectively. Accordingly, as of November
1997 the Company had recorded a subscription receivable and had a related charge
to property and equipment amounting to $855,299. As of June 30, 1999, the
Company had received services relating to shares amounting to $8,255. The
Company adjusted the value of the remaining shares and the subscription
receivable to reflect the fair market value of $.14 per share. As of June 30,
1999, subscription receivables relating to the remaining 690,000 shares amounted
to $94,375. Subsequent to year-end, the construction company returned 600,0000
common shares to the Company at a fair value of $77,500, thus reducing the
subscription receivable to $16,875.

In November 1997, the Company issued 135,000 common shares valued at a fair
market value of $1.17 per share for professional services rendered.

On November 7, 1997, the Board of Directors adopted a Stock Option Plan (the
"Plan"). This Plan provides for the grant of Incentive Stock Options and
Non-qualified Stock Options to employees selected by the Board of Directors or
Compensation Committee. The Plan also sets forth applicable rules and
regulations for Stock Options granted to non-employee directors. To date,
135,000 options each have been granted to the Company's two chief operating
officers to acquire 135,000 shares at the market price on the date of grant.

On April 2, 1998, the Board of Directors issued to each of Stephen Schatzman and
Alex Gimelstein stock options to purchase up to 500,000 shares of the Company's
common stock at a price of $.30 per share, the quoted market price at that date.
On June 30, 1998, the Company rescinded these options.

In consideration of the Company's attorney accepting a reduced fee, the Board of
Directors issued Mr. Littman 150,000 shares of common stock. The value of the
consideration, $45,000 based on the quoted market value, is being amortized over
a twelve-month period beginning April 1998. As of June 30, 1998, the Company had
deferred costs amounting to $33,750 included in prepaid expenses and other on
the accompanying balance sheet. During fiscal 1999, these deferred costs have
been expensed and are included in professional fees in the accompanying
statement of operations.

During July 1998, the Company issued 750,000 shares of common stock for public
relations services to be performed in the future. The agreement was subsequently
rescinded and the Company expects to receive these shares back in the near
future. Accordingly, these shares were valued at fair value and the Company
recorded a subscription receivable as of June 30, 1999.

See Note 5 relating to 8% convertible debentures payable.





                                      -15-
<PAGE>





                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 8 - STOCKHOLDERS' EQUITY (Continued)

Common Stock (Continued)

Subsequent to year-end, 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 shares and freely tradable and the remaining 1,800,000 common shares
restricted pursuant standard Rule 144 legend.

On April 14, 1999, two officers were granted options to acquire 1,000,000 shares
of the Company's common stock at an exercise price of $.06 per share. The
warrants are exercisable commencing April 14, 1999 for a period of five years.
The fair value of the option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: dividend
yield of 0%; expected volatility of 20% risk-free interest rate of 4.5%, and an
expected life of 60 months.


Preferred Stock

The Company's articles of incorporation authorize the issuance of 5,000,000
shares of preferred stock. The Company's Board of Directors has authority,
without action by the shareholders, to issue all or any portion of the
authorized but unissued preferred stock in one or more series and to determine
the voting rights, preferences as to dividends and liquidation, conversion
rights, and other rights of such series.

On August 1, 1997, the Board of Directors of the Company created a series of
preferred stock consisting of 2,500 shares and designated it as the Series A
Convertible Preferred Stock - no par value. The Series A Preferred Stock is
convertible, at the holders option, into that number of shares of common stock
equal to $1,000 divided by the lower of (i) seventy percent (70%) of the average
market price of the common stock for the five trading days immediately prior to
the conversion date or (ii) $1.46, increased proportionally for any reverse
stock splits and decreased proportionally for any forward stock split or stock
dividend. The holders of Series A Preferred Stock have no voting rights, the
shares are redeemable at a price of $1,350 per share upon notice of conversion,
and have a liquidation preference of $1,350 per share.

Prior to June 30, 1998, the Company had issued 2,100 shares of the Series A
Convertible Preferred Stock for a net amount of $1,883,450. For the year ended
June 30, 1998, the Company recognized a preferred stock dividend amounting to
$700,000 calculated as the difference between the conversion price ($1.47 per
share) and the fair value of the common stock into which the shares are
convertible, multiplied by the number of common shares into which the preferred
stock is convertible.








                                      -16-
<PAGE>



                   THE HAVANA REPUBLIC, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



NOTE 8 - STOCKHOLDERS' EQUITY (Continued)

Preferred Stock (Continued)

Certain holders of the Series A Convertible Preferred Stock were issued (i) an
option to purchase an aggregate of 200,000 shares of common stock for two years
at an exercise price of $1.92 per common share and (ii) an option to purchase an
aggregate of 200,000 shares of common stock for two years an exercise price of
$2.88 per common share. As of June 30, 1999, these options are still
outstanding. During the three-month period ended June 30, 1998, certain holders
of the Series A Preferred Stock converted 1,120 preferred shares into 7,922,581
shares of the Company's common stock. For the year ended June 30, 1999, Series A
Preferred Shareholders converted 394 preferred shares into 9,425,627 common
shares. As of June 30, 1999, the remaining 586 shares of Series A Preferred
Stock may be converted, at the holder's option, into shares of common stock.

On April 2, 1998, the Board of Directors of the Company created a series of
preferred stock consisting of 50,000 shares and designated it as the Series B
Convertible Preferred Stock - no par value. The Series B Preferred Stock shall
be entitled to 400 votes per share, is not redeemable, and has no conversion
rights. The holders of Series B Preferred have a liquidation preference of $.50
per share. In consideration of two officers of the Company forgiving an
aggregate of $25,000 due them in back salary, the Company issues 50,000 shares
of Series B Preferred Stock.

On December 9, 1998, the Board of Directors authorized the creation of 150,000
additional shares of Series B Preferred Stock that will bring the total
authorized Series B Preferred Stock to 200,000 shares. Each share ("Share") of
Series B preferred Stock issued shall be entitled to 400 votes, but the Shares
are not entitled to any dividends. The Shares shall be restrictive securities
and not convertible into shares of the Company's common stock; 75,000 shares
were issued to each of two officers for forgiveness of an aggregate of $15,000
in accrued salaries.

NOTE 9 - YEAR 2000

The Company believes it does not utilize software within its business processes
that may be impacted by the year 2000 issue. The year 2000 issue exists because
many computer systems and applications currently use two digit date fields to
designate a year. Data sensitive systems may recognize the year 2000 as 1900, or
not at all. This inability to properly treat the year 2000 could cause systems
to process critical financial and operational information incorrectly.

NOTE 10 - RISK AND UNCERTAINTY

Although the Company carries general liability insurance, it has no health
hazard policy. There can be no assurance that the Company will not be subject to
liability which is not covered by its general liability insurance, and such
liability could have a material adverse effect upon its business.




                                      -17-
<PAGE>



PART I

Item 1. Description of Business

GENERAL

         The Havana Republic, Inc., a Florida corporation (the "Company") was
formed on March 10, 1996. The Company is engaged in the business of owning and
operating upscale cigar emporiums devoted to the sale of premium cigars and
cigar related merchandise. The Company opened its first emporium in January 1997
in Weston, Florida, its second emporium opened in June 1998 in the Las Olas
Riverfront in Fort Lauderdale, Florida and its third emporium opened in May 1999
in downtown South Miami, Florida. The Company also sells its cigars and
accessories over the Internet through its fully interactive e-commerce cite,
Havana Republic.com.

         Premium cigars are generally defined according to three criteria: (i)
the cigars are made completely by hand; (ii) the cigars consist of long-filler
tobacco; and (iii) the cigars retail at a price range from $1 to more than $20
each. Hand-rolled cigars consist of three different categories of tobacco: (1)
the filler is the tobacco in the cigar; (2) the binder is the leaf that binds
the filler together; or (3) the wrapper is the tobacco leaf that wraps around
the rolled tobacco and finishes the cigar. A premium cigar uses only long-filler
tobacco, binders and wrappers that are composed solely of tobacco leaf.
Long-filler tobacco consists of half tobacco leaves rolled up, whereas
short-filler tobacco consists of smaller pieces of tobacco, including the
portions of the long-filler tobacco which are cut and discarded in producing
premium cigars. The quality of a premium cigar is based on the quality of the
tobacco used for the filler, binder and wrapper. Cigars that are not premium
cigars typically use short-filler, and may be wholly or partially manufactured
by machine. The Company has developed and plans to market a full line of premium
cigars, which will be sold under the brand name of Havana Republic. The Company
currently sells over 100 brands from other manufacturers, at its emporiums.

         The Company distributes premium cigars purchased from Tabanica, S.A.
("Tabanica"), a Nicaraguan corporation of which it owns a 50% equity interest.
Tabanica operates a factory located in Jalapa, Nicaragua The factory currently
has the capacity to produce premium hand-rolled cigars at the rate of
approximately 2 million cigars per year, which capacity can be further expanded.
Even though the Company owns 50% of Tabanica, it does not control that company's
board of directors or management.





                                      -18-
<PAGE>





THE MARKET

         The Company believes that the market for cigars has stabilized and does
not anticipate the market to grow. It is estimated that cigar sales in the
United States amount to more than $1 billion at the retail level.


THE EMPORIUMS

         The Company currently operates three emporiums, seven days a week. The
Company's first emporium is located in Weston, Florida. The emporium consists of
an upscale retail cigar emporium and private club section covering a total of
2,000 square feet. The private club section is designed for leisurely smoking
complemented by satellite television, coffee, expresso and soft drinks.
Individual humidors (in excess of 100) are leased to patrons for storing their
cigars. Sales of cigars amount to approximately 70% of total sales and sales of
accessories, such as humidors, lighters, cigar cutters, etc., account for the
balance. The club's decor is luxurious and upscale with generous utilization of
mahogany and marble. A minimum of two to five employees are required on the
premises. The cost of the furniture, fixtures and equipment required to open a
single emporium/club is approximately $500,000. Initial inventory at an emporium
costs approximately $300,000.

         The Company's second emporium was opened in June 1998 in the Las Olas
Riverfront in Ft. Lauderdale, Florida and the Company's third emporium opened in
downtown South Miami, Florida in May 1999. The Company intends to expand its
retail operations through the opening of additional emporiums in South Florida
and in other cities in the United States in which it believes there is a local
market for premium cigars. Additional openings will be dependent upon the
availability of financing. However, there can be no assurances that the Company
will be able to successfully obtain locations or financing.


THIRD-PARTY SUPPLIERS

         Havana Republic is presently able to purchase premium cigars directly
from almost all manufacturers such as La Gloria Cubana, Padron, General Cigar,
Consolidated, Fuentes and Dunhill, and is not dependent upon any one supplier
for cigars. However, there are no assurances that any or all of the suppliers
will continue to have available product. The Company intends to continue to
purchase directly from manufacturers and supplement its inventory with cigars
from the Tabanica factory.




                                      -19-
<PAGE>




COMPANY BRAND CIGARS

         In 1997, the Company entered into a contract with Tabanica, a cigar
manufacturer in Nicaragua, for the purchase of 625,000 cigars. The purchase
price for the cigars was $616,000, all of which has been paid. The Company owns
a 50% equity interest in Tabanica. However, the Company does not control its
management or board of directors. Tabanica will manufacture the cigars, and box
them for the Company in Nicaragua and deliver the cigars, F.O.B Managua,
Nicaragua for transport to the U.S. in lots of 25,000 cigars per month. The
Company commenced taking delivery of the first shipment of cigars from Tabanica
in January 1998 and shipments have increased in Fiscal 1998. The Company also
has the right to purchase additional cigars at cost plus 50%. The Company must
provide, at its own cost, all boxes, labels and binders, which is not a material
cost with respect to the cost of the cigars. The Company intends to sell the
cigars manufactured by Tabanica in its emporiums and to distributors for resale.

         The Company's 50% interest in Tabanica, gives the Company the
opportunity to purchase premium cigars at favorable prices and maintain
consistency in their blend and quality. Tabanica's factory consists of two
buildings of approximately 27,000 square feet. Tabanica leases approximately 170
acres within five miles of the factory to grow tobacco. Tabanica employs sixty
people engaged primarily in the manufacturing process which takes place in one
of the two factory buildings. Tabanica's other shareholder is Merardo Padron,
its president, who is in charge of its day to day operations. The manufacturing
capacity of the factory is presently 2 million cigars per year, which can be
expanded through the utilization of the factory's second building and the hiring
of additional employees.

         The manufacturing process for premium cigars includes the selection,
purchase and aging of the tobacco and the hand rolling of the cigars. The
tobacco will be selected by Tabanica upon consultation with the Company based
upon its flavor and quality. The availability and quality of tobacco varies from
season to season as a result of such factors as weather conditions and the
demand for the tobacco. As a result of the difference in taste between different
lots, the Tabinica, in conjunction with the Company, will be required to
continuously reformulate the tobaccos in its premium cigars in order to maintain
a consistent taste.

         The particular tobacco blend for each of the Company's cigars is
formulated from different tobaccos. The Company's premium cigars will use
long-filler tobacco primarily from Nicaragua. The Company will also obtain
tobacco from the Dominican Republic, Indonesia, Ecuador and Mexico, to be used
as binders, fillers and as wrappers for the cigars.



                                      -20-
<PAGE>


COMPETITION

         Competition affecting the Company's emporiums comes from other retail
tobacco and cigar stores, liquor stores, convenience stores and mail order. In
South Florida, the largest retailer of premium cigars is Mikes' Cigars in Bal
Harbour. Many other retailers also sell premium cigars and as competition has
increased. Competition is based upon diversity of brands and price. The location
of the Company's emporiums is also a major factor. Accordingly, the Company
intends to locate its emporiums in high-profile, high traffic sites in populated
areas.

         The Company believes that as a distributor of premium cigars it will
compete with a smaller number of domestic and foreign companies that specialize
in premium cigars and certain larger companies that maintain premium cigar
lines, including Consolidated Cigar, General Cigar Corporation, Caribbean Cigar,
Lane Ltd., and General Cigar Company. The market for premium cigars constitutes
a small portion of the cigar market in general. The Company believes that
smokers of premium cigars purchase cigars based on the perceived quality of the
tobacco and the taste profile of the cigar.

GOVERNMENT REGULATION; TOBACCO INDUSTRY LITIGATION; TAXES

         The tobacco industry is subject to regulation by Federal, state and
local governments, and the recent trend has been toward increased regulation.
Such regulations include labeling requirements, limitations on advertising and
prohibition of sales to minors, laws restricting smoking in public places
including offices, office buildings, restaurants and other eating
establishments. Due to health concerns, the cigar industry could become subject
to increased regulation under Federal and state health and safety regulations.
In addition, cigars have been subject to excise taxation at the Federal, state
and local level, and such taxation may increase in the future. Tobacco products
are especially likely to be subject to increases in excise taxation because of
the detrimental effects of tobacco on the health of both smokers and others who
inhale secondary smoke.


         Over the years, the federal excise tax rate on large cigars (weighing
more than three pounds per thousand cigars) was increased. Currently, the
federal tax is $33.25 per thousand cigars. The Company does not believe that the
current level of excise taxes will have a material adverse effect on the
Company's business, but there are no assurances that additional increases will
not have a material adverse effect on the Company's business.



                                      -21-
<PAGE>


         Cigars and pipe tobacco are also subject to certain state and local
taxes. Since 1964, the number of states that tax cigars has risen from six to
forty-one. State excise taxes generally range from 2% to 75% of the wholesale
purchase price.

         Cigar manufacturers, like other producers of tobacco products, are
subject to regulation in the U.S. at the federal, state and local levels.
Together with changing public attitudes toward smoking, a constant expansion of
smoking regulations since the early 1970s has been a major cause for the decline
in consumption. Moreover, the trend is toward increased regulation of the
tobacco industry.

         In recent years, a variety of bills relating to tobacco issues have
been introduced in the Congress of the United States, including bills that would
have prohibited the advertising and promotion of all tobacco products and/or
restricted or eliminated the deductibility of such advertising expenses; set a
federal minimum age of 18 years for use of tobacco products; increased labeling
requirements on tobacco products to include, among other things, addiction
warnings and lists of additives and toxins; modified federal preemption of state
laws to allow state courts to hold tobacco manufacturers liable under common law
or state statutes; and shifted regulatory control of tobacco products and
advertisements from the Federal Trade Commission to the U.S. Food and Drug
Administration (the "FDA"). In addition, in recent years, there have been
proposals to increase tobacco excise taxes. In some cases, hearings were held,
but only one of these proposals was enacted, namely, that states, in order to
receive full funding for federal substance abuse block grants, establish a
minimum age of 18 years for the sale of tobacco products along with an
appropriate enforcement program. The law requires that states report on their
enforcement efforts. Future enactment of the other bills may have an adverse
effect on the sales or operations of the Company.

         In addition, the majority of states restrict or prohibit smoking in
certain public places and restrict the sale of tobacco products to minors. Such
places where the majority of states have prohibited smoking include: any public
building designated as non-smoking; elevators; public transportation;
educational facilities; health care facilities; restaurants and workplaces.

         Local legislative and regulatory bodies have also increasingly moved to
curtail smoking by prohibiting smoking in certain buildings or areas or by
requiring designated "smoking" areas. In a few states, legislation has been
introduced, but has not passed, which would require all little cigars sold in
those states to be "fire-safe" little cigars, i.e., cigars which extinguish
themselves if not continuously smoked. Passage of this type of legislation and
any other related legislation could have a materially adverse effect on the
Company's cigar business because of the technological difficulties in complying
with such legislation. There is currently an effort by the federal Consumer
Product Safety Commission to establish such standards for cigarettes. The
enabling legislation, as originally proposed, included little cigars. However,
little cigars were deleted due to the lack of information on fires caused by
these products.



                                      -22-
<PAGE>




         Although federal law has required health warnings on cigarettes since
1965, there is no federal law requiring that cigars carry such warnings.
However, California requires "clear and reasonable" warnings to consumers who
are exposed to chemicals known to the state to cause cancer or reproductive
toxicity, including tobacco smoke and several of its constituent chemicals.
Violations of this law, Proposition 65, can result in a civil penalty not to
exceed $2,500 per day for each violation. Although similar legislation has been
introduced in other states, no action has been taken. However, since 1988, most
cigars sold in the United States carry cancer warning labels.

         The FDA has proposed rules to regulate cigarettes and smokeless tobacco
in order to protect minors. Although the FDA has defined cigarettes in such a
way as to include little cigars, the ruling does not directly impact large
cigars. However, once the FDA has successfully exerted authority over any one
tobacco product, the practical impact would be felt by manufacturers of any
tobacco product. If the FDA is successful, this may have long-term repercussions
on the large cigar industry.

         The federal Occupational Safety and Health Administration (OSHA) has
proposed an indoor air quality regulation covering the workplace that seeks to
eliminate nonsmoker exposure to environmental tobacco smoke. Under the proposed
regulation, smoking must be banned entirely from the workplace or restricted to
designated areas of the workplace that meet certain criteria. The proposed
regulation covers all indoor workplaces under OSHA jurisdiction, including, for
example, private residences used as workplaces, hotels and motels, private
offices, restaurants, bars and vehicles used as workplaces. The tobacco industry
is challenging the proposed OSHA regulation on legal, scientific and practical
grounds. It also contends that the proposed regulation ignores reasonable
alternatives. There is no guaranty, however, that this challenge will be
successful. Although the Company does not believe that the proposed OSHA
regulation would have a material adverse effect on the cigar industry or the
Company, there are no assurances that such regulation would not adversely impact
the Company, particularly the "club" sections of the Company's emporiums.



                                      -23-
<PAGE>


YEAR 2000

         The Company has assessed its computerized systems to determine its
ability to correctly identify the Year 2000 and has determined that they will
correctly identify the Year 2000. The Company intends to implement an ongoing
program to review the status of its key suppliers to make sure they are Y2K
compliant. Management does not expect the Year 2000 issue to pose significant
operational or financial problems for the Company.

EMPLOYEES

     The Company has ten full-time and seven part-time employees, none of which
are parties to a collective bargaining agreement. The Company believes its
relationship with its employees is good.

     Eight full-time employees are engaged in management and administrative
activities and the remaining employees are engaged in sales and related
activities.

Item 2. Description of Property

     The Company maintains its corporate offices at its emporium located in
Weston, Florida pursuant to a lease covering approximately 2,000 square feet
which expires in 2001. This lease is subject to two five year renewal options.
The present annual rent inclusive of taxes, insurance and common area charges,
is approximately $60,000. The Company's Ft. Lauderdale emporium consists of
approximately 1,780 square feet and is subject to a lease expiring in 2004, with
a five year renewal option. The annual rent, including pass throughs is
approximately $106,000. The Company's South Miami emporium occupies
approximately 2,100 square feet and it subject to a lease expiring in 2009. The
annual rent, including pass throughs, is approximately $132,000.

         The Company believes that additional space will be available at
commercially reasonable rents. The Company's facilities, at this time, are
adequate; however, expansion of the Company's business may require additional
administrative offices.

Item 3. Legal Proceedings

     The Company is not involved in any material litigation.

Item 4. Submission of Matters to a Vote of Security Holders

         No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the Company's fiscal year.



                                      -24-
<PAGE>


                                     PART II

Item 5. Market of Common Equity and Related Stockholder Matters

                        MARKET PRICE OF THE COMMON STOCK

     The Company's Common Stock has been traded in the over-the-counter market
through the NASD OTC Electronic Bulletin Board under the symbol "HVAR" since
March 14, 1997. The table set forth below reflects the reported high and low bid
prices of the Common Stock for each quarter since March 1997, for the period
indicated. Such prices are inter-dealer prices without retail mark-ups,
mark-downs or commissions and may not represent actual transactions.

QUARTER ENDED                           HIGH            LOW

September 30, 1997                     $ 3.25           $0.96
December 31, 1997                      $ 1.38           $0.20
March 31, 1998                         $ 0.75           $0.28
June 30, 1998                          $ 0.61           $0.1875
September 30, 1998                     $ 0.22           $0.09
December 31, 1998                      $0.11            $0.02
March 31, 1999                         $0.11            $0.01
June 30, 1999                          $0.36            $.05

         Records of the Company's stock transfer agent indicate that as of
September 15, 1999 the Company had 108 record holders of its Common Stock.

         The Company has not paid any cash dividends to date, and does not
anticipate or contemplate paying cash dividends in the foreseeable future. It is
the present intention of management to utilize all available funds for working
capital of the Company.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

         This Management's Discussion and Analysis should be read in conjunction
with the Company's Consolidated Financial Statements, including the notes
thereto. This report contains certain forward-looking information which involves
risks and uncertainties. The actual could differ from the results anticipated
herein.



                                      -25-
<PAGE>




RESULTS OF OPERATIONS

YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED JUNE 30, 1998.

         Sales for the year ended June 30, 1999 ("1999") increased 100% to
approximately $1,200,000 from sales for the year ending June 30, 1998 ("1998")
of approximately $600,000. This increase is attributable mainly the fact that in
1999, the Company's had two fully operational emporiums.

         Cost of sales in 1999 approximately was $625,00 (54%) as compared to
$360,000 (60%) in 1998. The decrease as a percentage of sales was primarily due
to increased promotions in the industry and higher profit margins resulting from
the sale of individual cigars.

         Gross profit for 1999 was approximately $550,000 which was equivalent
to 46% of sales, as compared to approximately $235,000 which was equivalent to
40% of sales in 1998.

         General and administrative expenses for 1999 were approximately
$366,000 (31% of sales) as compared to approximately $500,000 (84% of sales) in
1998. The decrease in primarily attributable to the reduction of overhead by the
amortization of these costs over the three operating emporiums.

         Overall, in 1999, the Company sustained a loss of approximately
$530,000 or $0.03 per share as compared to a loss of approximately $750,000 or
$.14 per share for 1998.


YEAR ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED JUNE 30, 1997.

         Sales for the year ended June 30, 1998 ("1998") increased 66.6% to
$595,290 from sales for the year ending June 30, 1997 ("1997") of $357,000. This
increase is attributable solely to the fact that in 1997, the Company's only
emporium was operational for only six months. On an annualized basis, the
Company's sales decreased due to increased competition in the premium retail
cigar market.

         Cost of sales in 1998 was $359,111 (61.7%) as compared to $164,667
(47.7%) in 1997. The increase as a percentage of sales was primarily due to
discounting the sales price of some cigars and a general decline in the premium
cigar market.

         Gross profit for 1998 was $236,179 which was equivalent to 39.7% of
sales, as compared to $192,471, which was equivalent to 53.9% of sales in 1997.



                                      -26-
<PAGE>




         General and administrative expenses for 1998 were approximately
$500,000 (83.9% of sales) as compared to approximately $148,000 (41.5% of sales)
in 1997. The increase in primarily attributable to increases in salaries and
wages, travel and entertainment, advertising and telephone expenses.

         Overall, in 1998, the Company sustained a loss of $757,502 or $0.14 per
share as compared to a loss of $266,062, or $.03 per share for 1997.

LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 1999, the Company had working capital of approximately
$1,100,000. Since its inception, the Company has sustained losses of
approximately $2,200,000. The Company's operations and growth has been funded by
loans from third parties, the sale of common stock, Preferred Stock and
Convertible Debentures. These funds have been used for working capital, capital
expenditures, information systems development and other corporate purposes.

         In April 1996, the Company entered into an agreement with Tabanica for
future purchases of premium cigars and has paid Tabanica $617,000. The Company
had anticipated receiving the premium cigars in monthly shipments of 50,000
commencing in January, 1998, but shipments were delayed due to a dispute with
the Banana Republic. This dispute has been resolved without cost to the Company
and shipments of cigars from Tabanica commenced in Fiscal 1999. The Company's
future commitment of capital resources to the distribution of its brand name
cigars will be largely dependant upon market acceptance of these cigars.

         On July 1, 1998, the Company opened its second emporium in the Las Olas
Riverfront area in Ft. Lauderdale, Florida and it opened its third emporium at
the Shops of Sunset Place in the central business district of South Miami,
Florida in May 1999.

         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 will 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.



                                      -27-
<PAGE>




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

         From time to time, including herein, the Company may publish
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," or variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward looking
statements. The Company undertakes no obligation to update publicly any forward
looking statements, whether as a result of new information, future events or
otherwise.

         For a further description of some of these factors that could cause
actual results to differ materially from such forward-looking statements, see
"Risk Factors" below.

                                  RISK FACTORS

OPERATING LOSSES

         The Company has never been profitable and the ability of the Company to
operate profitability depends on the success of its current emporiums. There can
be no assurance, however,  that the Company can become profitable.

ADDITIONAL FINANCING REQUIREMENTS OF THE COMPANY

         To open additional emporiums and to continue to develop its brand name
cigars, the Company will require additional funding. No assurance can be given
that additional funds will be available to open additional emporiums.

GOVERNMENT REGULATION

         The tobacco industry in general has been subject to regulation by
Federal, state and local governments, and recent trends have been toward
increased regulation. Such regulations include labeling requirements,
limitations on advertising and prohibition of sales to minors, laws restricting
smoking from both public places and in offices, office buildings and restaurants
and other eating establishments. Certain states have required cigar vendors to
label cigars with health warnings. In addition, cigars have been subject to
excise taxation at the Federal, state and local level, and such taxation may
increase in the future. Tobacco products are especially likely to be subject to
increases in excise taxation because of the detrimental effects of tobacco on
the health of both smokers and others who inhale secondary smoke. No assurance
can be given that future regulations, tax policies or tobacco litigation will
not have a material adverse affect upon the ability of cigar companies,
including the Company, to generate revenue and profits.




                                      -28-
<PAGE>




TOBACCO INDUSTRY RISKS

         During the past decades the tobacco industry has been the subject of
advertising and public service campaigns against smoking in general.
Furthermore, most states and many individuals have brought lawsuits against
tobacco and cigarette companies for damages resulting from cancer caused by
smoking. Although the Company was organized in 1996 and all of its cigars have
been sold after both the risks of smoking and the addictive nature of nicotine
are generally known, no assurance can be given that the Company will not be
adversely affected by such factors.

COMPETITION

         The tobacco industry very competitive and is generally dominated by a
few companies which are well known to the public. In addition, the Company
competes with certain domestic and foreign companies that specialize in premium
cigars and certain larger companies that maintain premium cigar lines, including
Consolidated Cigar Company, Davidoff, Lane Ltd., and General Cigar Company.
Further, the Company's emporiums compete with other retail cigar stores in the
South Florida area, as well as liquor stores, supermarkets and convenience
stores. The Company's success depends upon the size and quality of its
emporiums' inventory, the maintenance of such inventory, the size and quality of
the inventory of cigar accessories, such as humidors, cigar cutters, cigar
cases, lighters, ashtrays, etc., and the quality of its employees, particularly
their knowledge of the inventory and attitude. No assurance can be given as to
the ability of the Company to compete successfully in any market in which it
conducts, or may conduct, operations. The Company's ability to compete as a
distributor of its brand name cigars depends upon the efficiency and continued
operation of the Tabinica factory, the quality of the cigars manufactured,
advertising and marketing strategies, and price. No assurances can be given that
the Company can successfully compete with major manufacturers and distributors.

LACK OF TRADE NAME PROTECTION

         The Company's name "Havana Republic" has been registered in the State
of Florida. The U.S. Patent and Trademark Office has approved the Company's
application for the trademark "Havana Republic" for its products.




                                      -29-
<PAGE>




DEPENDENCE ON MANAGEMENT AND OTHERS

         The Company's business is largely dependent upon its president, Mr.
Schatzman, and Mr. Gimelstein its vice president. The Company has five year
employment agreements with Mr. Schatzman and Mr. Gimelstein terminating in 2002.
The loss of the services of Mr. Schatzman or Mr. Gimelstein would have a
material adverse effect upon the Company's business and prospects.

NICARAGUAN FACTORY AND DISTRIBUTION

         The Company purchased for $50,000 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% (after being fully credited for its deposit for inventory purchases)
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 cigars. 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 controls and exchange regulations, and import and
export regulations, any of which could have a material adverse effect upon the
Company's cigar supply. Therefore it is not possible to predict whether the
Company's investment in and agreement with Tabanica will result in a stable and
long-term supply of premium cigars.

LIMITED INSURANCE COVERAGE

         Although the Company carries general liability insurance with an
aggregate limit of $2,000,000, it has no health hazard policy. There can be no
assurance that the Company will not be subject to liability which is not covered
by its general liability insurance, and such liability could have a material
adverse effect upon its business.

Item 7. Financial Statements

         See the Financial Statements of the Company which are attached hereto.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

        Effective August 5, 1999, the Registrant's certifying accountants
resigned as the Company's auditors. There upon, the Company's Board of Directors
recommend and approved the retaining of Butner and Kahle, CPA, PA as the
Company's new certifying accountants. The former principal account's statements
of the past two years did not contain an adverse opinion or disclaimer of
opinion, nor was it modified as to uncertainty, audit scope, or accounting
principles. There were no disagreements with the former accountant on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope or procedures.



                                      -30-
<PAGE>


Item 9. Directors, Executive Officers, Promoters, Control Persons; Compliance
with Section 16(a) of the Exchange Act

         The present members of the Board of Directors, all executive officers,
their ages and positions with the Company are set forth below:

NAMES                       AGE                    POSITION
- -----                     ---                    --------

Stephen Schatzman           47          President, Secretary and Director
Alex Gimelstein             47          Vice President, Treasurer and Director


     Stephen Schatzman has been President, Secretary and Director of the Company
since inception. From 1972 to 1990, he was the General Manager of Superior
Stores, a six-store chain of 30,000 square foot, high volume discount drug
stores. From 1990 to 1996, he was President of Villa Deli, a 160-seat restaurant
on Miami Beach. Mr. Schatzman devotes his full time to the Company. He is
responsible for purchasing for all locations, inventory, warehousing, and
developing and implementing merchandising and other Company policies, and for
all day to day operations.

         Alex Gimelstein has been Vice President, Treasurer and Director of the
Company since inception. He is also Vice President of Zelick's Tobacco Corp. on
Miami Beach for over 25 years. Zelick's is a retail and wholesale tobacco and
sundries operation owned by Mr. Gimelstein's family. Mr. Gimelstein has also had
extensive experience in the tobacco industry, having owned and operated several
cigar factories in foreign countries. Mr. Gimelstein devotes approximately half
of his working time to the Company. He is responsible for the procurement of
cigars, the development of a distribution network and the Company's relationship
with Tabanica.

     The officers of the Company are elected by the Board of Directors to serve
until their successors are elected and qualified. The directors of the Company
are elected at the annual meeting of the stockholders. The By-laws provide for a
Board of Directors to be comprised of between two and seven persons.




                                      -31-
<PAGE>




     The Company's Certificate of Incorporation and Bylaws provide for the
indemnification of, and advancement of expenses to, directors and officers of
the Company. The Company has also entered into agreements to provide
indemnification for its directors and executive officers.

     In May 1997, the Company entered into employment agreements with Stephen
Schatzman, the President and Secretary of the Company and Alex Gimelstein, the
Vice President and Treasurer of the Company. The terms of the two employment
agreements, except for the position held with the Company, are identical. The
agreements, which expire on December 31, 2001, provide for initial annual base
salaries of $80,000 with additional increases, bonuses and compensation to be
decided by the Board of Directors. The employment agreements also provide that,
upon mutual agreement between the Company and the employee, all or any part of
the salary due the employee may be deferred for an indefinite period of the time
and/or paid in shares of the Common Stock of the Company.

Director Compensation

     The Company does not provide additional compensation for employee
directors. In the event non-employees are appointed as directors, compensation
may be paid on an annual or per meeting basis to be determined.

ITEM 10. Executive Compensation

         The following table shows, for the period ended June 30, 1999, the cash
and other compensation paid to each of the executive officers of the Company.
<TABLE>
<CAPTION>


                        ANNUAL COMPENSATION
NAME AND                -------------------        OTHER          AWARDS        OTHER
POSITION HELD          YEAR   SALARY    BONUS   COMPENSATION    RESTRICTED      STOCK
                                                                                AWARDS
--------------         ----   -------   -----   ------------    ----------    ---------
<S>                    <C>    <C>         <C>         <C>        <C>           <C>
Steven Schatzman       1999   $80,000    -0-         -0-         1,000,000(1)  75,000(2)
President, Secretary

Alex Gimelstein        1999   $80,000    -0-         -0-         1,000,000(1)  75,000(2)
Vice President,
Treasurer

<FN>

(1) On October 8, 1998, the Company granted Mr. Schatzman and Alex Gimelstein
each the option to purchase up to 500,000 shares of the Company's restricted
common stock at the then market price of $0.06 per share, which were
subsequently canceled. On April 14, 1999, the Company granted Mr. Schatzman and
Alex Gimelstein each the option to purchase up to an additional 1,000,000 shares
of the Company's restricted common stock at the then market price of $0.06 per
share. As of this date, no options have been exercised.

(2) In December 1998, in consideration of both Mr. Schatzman and Mr. Gimelstein
forgiving $7,500 due them in back salary, each was issued 75,000 shares of
Series B Preferred Stock.
</FN>
</TABLE>


                                      -32-
<PAGE>



Item 11. Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth information relating to the beneficial
ownership of Company Common Stock as of September 27, 1999 by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock (ii) each of the Company's directors, and
(iii) all of the Company's directors and executive officers as a group.

                                       SHARES OF             PERCENTAGE
NAME                                   COMMON STOCK            OWNED
-----                                  ------------          ----------


Stephen Schatzman                      2,835,500(1)(2)          10%
  2101 N.E. 212th Street
  Miami, Florida 33179

Alex Gimelstein                        2,835,500(1)(3)          10%
  21160 N.E. 22nd Court
  Miami, Florida 33179

All Directors and Executive Officers
  as a Group (2 persons)               5,671,000                20%


(1) Does not include 25,000 shares of the Company's Series B Preferred Stock
each owned by Messrs. Schatzman and Gimelstein. Each share of Series B Preferred
Stock is entitled to 400 votes per share. As a result of this issuance, Messrs.
Schatzman and Gimelstein have the right to vote what is equivalent to an
additional 10,000,000 shares of common stock.



                                      -33-
<PAGE>




(2) Includes 200,000 shares of Common Stock held by Mr. Schatzman as custodian
for his minor children, as to which shares he disclaims any beneficial interest;
includes options to purchase 135,000 shares.

(3) Includes 100,000 shares of Common Stock held by Mr. Gimelstein's adult son
and 150,000 shares of Common Stock held by Mr. Gimelstein as custodian for his
three minor children, as to all of which shares Mr. Gimelstein disclaims any
beneficial interest; includes options to purchase 135,000 shares.



Item 12. Certain Relationships and Related Transactions

         Not Applicable.

Item 13.  Exhibits and Reports on Form 8-K.

     2.1          Plan of Merger dated November 6, 1997*
     2.2          Articles of Merger*
     3.1          Amended and Restated Articles of Incorporation*
     3.2          By-Laws*
     4.1          Certificate of Designation/Class A Convertible Preferred
                  Stock*
    10.1          Employment Agreement with Stephen Schatzman*
    10.2          Employment Agreement with Alex Gimelstein*
    10.3          Lease/Weston*
    10.4          Lease/Fort Lauderdale*
    10.5          Amended and Restated Contract for Sale of Tobacco and
                  Cigars*
    10.8          Form of Indemnification Agreement with directors*
    10.9          Lease by and between Bakery Associates, Ltd., a Florida
                  limited partnership and Havana Republic Sunsetplace, Inc.
                  December 8, 1997*
    23.2          Consent of Millward & Co., P.A., and Butner & Kahle,
                  independent certified public accountants

    27            Financial Data Schedule



                                      -34-
<PAGE>


8-K filed with the Securities and Exchange Commission on August 13, 1999**

* Incorporated herein by reference to Form SB-2 under the Securities Act of 1933
  filed with the Commission under file number 333-40799

**Incorporated herein by reference

**
Subsidiaries of the Company:
         Havana Republic W.H., Inc. (Florida)
         Havana Republic Brickell Station, Inc. (Florida)
         Havana Republic Sunset Place, Inc.



                                      -35-
<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

                                          THE HAVANA REPUBLIC, INC.
                                                (Registrant)

                                           By: /S/ STEVEN SCHATZMAN
                                           -------------------------------------
                                           Steven Schatzman, President
                                           Date: September 27, 1999

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and the capacities on the dates
indicated:

SIGNATURE                         TITLE                              DATE
----------                        -----                              ----

/S/ STEVEN SCHATZMAN
---------------------          Director, President                   9/27/99
Steven Schatzman               Chief Executive Officer



/S/ALEX GIMELSTEIN
---------------------          Director, Vice President              9/27/99



                                      -36-