<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

         [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

                   For the fiscal year ended December 31, 2001
                                       OR
         [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

               For the transition period from ________ to ________

Commission File Number: 0-24269
-------------------------------

                             THE HAVANA GROUP, INC.
                   -------------------------------------------
             (Exact name of Registrant as specified in its charter)

                Delaware                                            34-1454529
-------------------------------------------               --------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization                             (Identification No.)

5701 Mayfair Road
N. Canton, Ohio                                                          44720
-------------------------------------------                      -------------
(Address of principal executive offices)                            (Zip Code)

Registrant's telephone number,
including area code:                                            (330) 492-8090
                                                                --------------

Securities registered pursuant to Section 12(b) of the Act:
                                      None

--------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value, Class A Common Stock Purchase Warrants
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [x]. No [ ].

Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not 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 [ ].

     As of May 14, 2002 at 4:00 P.M., the aggregate market value of the voting
stock held by non-affiliates, approximately 1,799,000 shares of Common Stock,
$.001 par value, was approximately $89,950 based on the last sale price of
approximately $.05 for one share of Common Stock on such date. The number of
shares issued and outstanding of the Registrant's Common Stock was 2,905,000 as
of May 14, 2002. The number of shares issued and outstanding of the Registrant's
Preferred Stock was 6,100,000 as of May 14, 2002.

<PAGE>

Item 1.  Description of Business
-------  -----------------------

GENERAL

         The Havana Group, Inc. ("Havana" or the "Company") is engaged in the
business of (i) operating a retail smokeshop in Canton, Ohio which primarily
sells pipes, cigars and smoking accessories and, (ii) marketing pipes, cigars,
tobaccos and related accessories directly to consumers through its full color
catalog (the "Carey Smokeshop Catalog"). The Company has developed a website
under the name "Smokecheap.com" and markets certain of its products through this
website.

         We own a wholly owned subsidiary namely, Monarch Pipe Company
("Monarch"). Monarch manufactures smoking pipes that are exclusively sold by the
Company. Monarch is located in Bristow, Oklahoma. Monarch employs two people and
has a production capacity of 10,000 smoking pipes per year.

         We also owned a second wholly owned subsidiary, Phillips & King,
International. Inc., which was engaged in wholesale distribution of tobacco
products. (See "Recent Development"). The business was discontinued on March 12,
2002.

         Our predecessor, E.A. Carey of Ohio, Inc., an Ohio corporation
("Carey"), formed the Company as a Delaware subsidiary on November 26, 1997 and
merged Carey into the Company for the purpose of its reincorporation in
Delaware, which merger was effective December 5, 1997.

         In connection with this reincorporation, we issued 1,000,000 shares of
Common Stock to Duncan Hill, Inc. ("Duncan Hill") and assumed all liabilities of
Carey. Our Company through Carey has been in business for over 40 years. Carey
was formed to sell the patented Carey "Magic Inch" smoking pipe exclusively
through mail order during the 1960's and 1970's. In 1984, Duncan Hill purchased
Carey.

         Since then, Carey (and now our Company) has operated as a subsidiary
under Duncan Hill's control. Duncan Hill, a publicly-held corporation, is
controlled approximately 68% by William L. Miller, the Company's Chief Executive
Officer, and his wife, Jeanne E. Miller. Unless otherwise indicated, all
references in this Form 10-KSB to the Company include the Company, Monarch , and
its predecessor, Carey.

In May 1998, we sold 460,000 Units to the public; each Unit consisted of one
share of Common Stock, $.001 par value, and two Redeemable Class A Common Stock
Purchase Warrants. Each Class A Warrant entitles the holder to purchase one
share of Common Stock at a price of $5.25 and is exercisable at any time until
the close of business on May 14, 2003. The Common Stock and Class A Warrants are
quoted on the OTC Electronic Bulletin Board of the National Association of
Securities Dealers, Inc. ("NASD") under the symbols "HVGP" and "HVGPW",
respectively. (See "Item 5 Market for Common Equity and Related Stockholder
Matters)

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Our Company has a deficit in working capital of $406,429 as of December 31,
2001. At May 17, 2002 The Havana Group had less than $15,000 in cash. It is in
extreme need of additional sources of financing of approximately $200,000 to
continue as a going concern. In the event our Company is not successful in
securing additional financing, it may be forced to close its retail store, its
catalog operation, and its web site, or continue operations on a reduced basis.
Alternatively, the Company may be forced to sell or license all of its business
or to merge with a third party. Obtaining additional financing on terms
satisfactory to the Company, of which there can be no assurance, could result in
a change in control of the Company

RECENT DEVELOPMENT

         On August 4, 2000, we entered into an agreement with John S. Parker,
Priscilla H. Parker, Jerold E. Christensen and Linda L. Christensen (the
"Sellers") and acquired 100% of the capital stock of Phillips & King
International, Incorporated ("P&K") in exchange for (i) 450,000 shares of
Havana's Common Stock with piggy-back registration rights, (ii) $900,000 in cash
which was paid to P&K on behalf of Sellers, and (iii) assumption of liabilities
estimated at approximately $1,918,000. This transaction was accounted for under
the purchase method of accounting. See Note M contained in notes to the
Financial Report included elsewhere herein.

         P&K is a wholesale distributor of tobacco, cigars, pipes and related
smoking products. P&K's sales reached a peak of $26.7 million in 1997,
reflecting the popularity of premium cigars, followed by declines in sales of
33% in 1998, 22% in 1999, 20% in 2000, and 28.1% in 2001. P&K filed for Chapter
11 Bankruptcy on a voluntary basis on February 8, 1999, and emerged from
bankruptcy in August 2000 as a result of our agreement to purchase P&K.

The P&K credit facility was provided by the Wells Fargo Bank, and consisted of a
$2,000,000 line of credit based upon levels of Inventory and Receivables. At
December 31, 2000, the total amount outstanding was $896,212. At September 30,
2001, the total amount outstanding was $644,193, but our Company was in default
on certain covenants of the loan agreement. As a result, Wells Fargo & Co.
notified P&K on November 16, 2001 that P&K was in default of a number of
covenants of the Wells Fargo loan agreement, and that they were terminating any
commitment to lend under the agreement. Because of this and continuing negative
cash flow, the Company discontinued the operation of P&K on March 12, 2002 and
transferred all P&K's property to David K. Gottlieb, an Assignee for the Benefit
of Creditors. (See Note O to the Financial Report)

INDUSTRY TRENDS AND DEVELOPMENTS

         The market for non-cigarette smoking products is often characterized as
the market for premium cigars, and recent trends, measured by the Cigar
Association of America's importation of Class H imports from the 10 major cigar
supplier countries, indicate that premium cigars reached a peak of 417,777 in
1997, and then declined 40.4% to 249,150 units in 2000, and remained flat at
251,231 units in 2002. We believe that there can be no assurance that the market
for premium cigars will not continue the declining trends of the past few years.

Consolidations and Mergers

         During 2000 a number of consolidations in the cigar industry were
completed and, as a result, over 50% of the premium cigar market currently is
controlled by less than five companies. We believe that, over time, the large

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consolidations in the premium cigar business will be accompanied by a
proportionate amount of cost-cutting; sales forces will be consolidated; and
that the consolidated companies will play a more significant role in the
distribution business to smokeshops and other outlets. The result is increased
competition in the distribution of tobacco products.

Methods of Distribution

RETAIL SMOKESHOPS

         In December 2001, Smokeshop Magazine issued their 2000 annual survey of
retail smokeshops. The magazine reported that the average smokeshop had $539,000
in retail sales for the year 2000, an increase of 7.8% over the year 1999. The
Havana Group, Inc., from its industry sources, estimates that there are
approximately 3,000 retail smokeshops in the United States. We do sell tobacco
products through our retail store, but we do not currently offer products on a
wholesale basis to other retailers.

DIRECT TO CONSUMERS

         We have historically offered our products to consumers through our
"Carey's Smokeshop" Catalog, exclusively by mail order and through our website
described below. In the event we can obtain additional financing of
approximately $200,000, we believe that Carey's Smokeshop catalog provides a
good and potentially profitable revenue base of $1 million to $2 million per
year. We believe that we can maintain our customer base of direct sales to
consumers, but significant expansion of the customer base by direct advertising
to consumers is expensive and inefficient. To make its customer base more
efficient, the Company established the Carey "Tobacco Lover's Club" in 1999,
which offers through our Carey's Smokeshop catalog discounted prices to
consumers in return for an annual membership fee, currently $20 per year.

INTERNET E-COMMERCE SITE

         Numerous Internet sites have been offering premium cigars and other
smoking related products at discounted prices. We have no data regarding the
number of such sites or the amount of sales generated by this medium, but we
believe that e-commerce sites can be highly effective as a value oriented direct
marketing outlet.

         Our www.smokecheap.com Internet site became operational in September
1999 as a part of Yahoo! Shopping. To date smokecheap.com sales have not been
significant, producing sales of less than $100,000 per year. In the event we can
secure additional financing of approximately $200,000, we believe that our web
site can profitably carry an expanded product line and is capable of significant
growth.

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STRATEGIES

         Other than a brief period of premium cigar expansion peaking in 1997,
the tobacco business has been in a period of long-term decline. Our lack of
success in producing profitable sales growth in the tobacco related business has
been marked by historical losses and a lack of positive cash flow. We believe
that the following strategies are necessary:

         o        Discontinue its unprofitable Phillips and King wholesale
                  operation. (See Financial Report Note O)

         o        Consolidate its direct marketing operations into "Havana
                  Direct" operations in Ohio.

         o        Cut operational costs to provide positive cash flow at Havana
                  Direct.

         o        Prepare and seek additional equity financing of approximately
                  $200,000. In the event our Company is not successful in
                  securing additional financing, we may be forced to close our
                  retail store, our catalog operation, and our web site, or
                  continue operations on a reduced basis.

HAVANA GROUP DIRECT
-------------------

MERCHANDISING AND PRODUCT DEVELOPMENT

         We design all of our Carey "Magic Inch" and Duncan Hill "Aerosphere"
smoking pipes and produce them at its Monarch Pipe facility in Oklahoma. The
current Carey catalog contains 18 design groups.

         We merchandise tobaccos and cigars from domestic sources, which either
import their products or manufacture them domestically. Carey offers 31 tobacco
blends in its current catalog, along with 41 different brands and sizes of
cigars.

         We currently devote approximately 10% of our catalog space to
Make-Your-Own cigarettes. The products were sold under a variety of supplier
brand names, and supplier relationships were developed for the supply of
cigarette tobacco, paper cigarette tubes, and related cigarette making machines.

MARKETING

         Currently, our Company markets its products directly to consumers
through its "Carey's Smokeshop" catalog, which consists of 56 full color pages
offering pipes (65%), tobaccos, and related accessories (10%), cigars and cigar
related accessories (25%), and make-Your-Own cigarettes (10%). On May 1, 2002 we
mailed approximately 23,000 catalogs to our customers. The success of this
mailing and the immediate receipt of additional financing of at least $200,000
is important to our Company to continue as a going concern.

                                       5
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         We have operated a retail outlet, "Carey's Smokeshop," since 1984. The
retail outlet offers traditional smokeshop products, but was not profitable in
the past two years In the event additional financing is not obtained, our retail
store may be sold, licensed, or closed.

CUSTOMER SERVICE AND TELEMARKETING

         During 2001, we derived approximately 72% of our non-club revenue
through orders placed over the telephone. Our payment terms have been major
credit cards, checks or open account. Our return policy is unconditional, and
provides that if a customer is not satisfied with his or her purchase for any
reason, it may be returned within 30 days for a full refund or exchange.

FULFILLMENT AND DELIVERY

         Prior to March 2000, we purchased our fulfillment operations from our
affiliate, Kids Stuff Inc. a company controlled by Duncan Hill. The facility is
designed to process incoming shipments on a palletized or boxed basis, and to
process outgoing shipments on an individualized cost effective basis. Orders
shipped were individually recorded and posted through the use of barcode
scanners, so that sales records and credit card deposits are electronically
posted.

         We leased our own operations facility effective January 1, 2000 and
currently provide our own fulfillment and delivery services. Our facility
consists of 6,000 square feet of offices and 11,000 square feet of warehouse
space. We pay $96,000 per annum for this facility, less $30,000 per year in
sub-lease income from another company. In January 2002 our affiliate, Kids
Stuff, Inc., sub-leased the remainder of the available office space. In April
2002 substantially all Kids Stuff's assets were assigned to its major secured
creditor, who continues to rent space on a month-to-month basis.

INVENTORY / PURCHASING

         We conduct our purchasing operations at our general offices in Canton,
Ohio. Each catalog contains approximately 550 products or stock-keeping units
(SKU's), and the website SmokeCheap.com, features over 400 products. Each
product is reviewed weekly through the use of computerized reports that provide
detailed information regarding inventory value, unit sales, and purchasing
delivery times. Products are ordered as required for our inventory.

PRODUCT SOURCING

         We acquire products for resale in our catalogs from numerous domestic
and international vendors. All "Carey" and "Duncan Hill" pipes are manufactured
by our wholly-owned subsidiary, Monarch, which supplies approximately 11% of our
catalog products. We have two suppliers that supply over 10% of the Company's
products, and believe that most products can be sourced from alternative
suppliers.

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SEASONALITY

         Our revenues are not significantly impacted by seasonal fluctuations,
as compared to many other retail and catalog operations. The Smokeshop customer
is believed to be generally the end user of the product so purchases are spread
throughout the year, rather than being concentrated between October and
December, as are traditional gift purchases.

DATA PROCESSING

         At the present time we provide our own data processing services to
process its orders and shipments. Additionally, we have invested approximately
$52,000 in data processing equipment to provide e-mail, networking, and
high-speed Internet access.

AGREEMENT WITH KIDS STUFF, INC.

         Effective January 1, 1998, we entered into a one-year agreement with
Kids Stuff whereby Kids Stuff provides administrative functions to the Company
at an annual cost of $206,100 plus $2.40 per order processed. Services included
accounting and payroll services, administration and human resource management,
data processing, office equipment and facilities use, merchandising and
marketing services, purchasing services, and shipping and fulfillment services.
Fees were based on actual 1997 costs.

         At January 1, 1999 the agreement was modified and extended on a
month-to-month basis as we began to incur direct costs for its administrative
functions. We paid to Kids Stuff an accounting, data processing, and
administrative charge of $15,000 per year plus $1.75 per shipment for warehouse
services.

         In March 2000, we performed our own fulfillment services from our
leased facility located in North Canton, OH, and paid Kids Stuff $2,500 per
month for services as accounting, payroll, data processing and human resources
provided to the Company by Kids Stuff, Inc.

         In January, 2002, Kids Stuff sub-leased the remaining office space
available at our facility. In April 2002 substantially all Kids Stuff's assets
were assigned to its major secured creditor, who continues to rent space on a
month-to-month basis.

         The current agreement shares equally the facility expense and related
costs, and provides for sharing the overhead expense on a pro-rata basis.
Overhead expenses include accounting, data processing, marketing, purchasing,
and administration.

COMPETITION

         We have identified four companies that are involved in mail order
tobacco products as a primary method of sales and distribution, which include
800 JR Cigar, Thompson's Cigar, Fred Stoker & Sons, Inc., and Finck Cigar Co.
All are in the mail order tobacco businesses and are substantially larger than
the Company. Competition in all aspects of our Company's business is intense,

                                       7
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and our Company represents an insignificant share of the market. No assurances
can be given that we will be able to successfully compete in all aspects of its
business in the future.

REGULATORY MATTERS


         Our business, and the catalog industry in general, is also subject to
regulation by a variety of state and federal laws relating to, among other
things, advertising and sales taxes. The Federal Trade Commission regulates our
advertising and trade practices and the Consumer Product Safety Commission has
issued regulations governing the safety of the products which the Company sells
in its catalogs. Under current law, catalog retailers are permitted to make
sales in states where they do not have a physical presence without collecting
sales tax. We have no claims or regulatory matters in process or pending as of
March 31, 2002.

TOBACCO INDUSTRY LITIGATION

         The tobacco industry has experienced and is experiencing significant
health-related litigation. Private plaintiffs in such litigation are seeking
compensatory and, in some cases punitive, damages for injuries claimed to result
from the use of tobacco products or exposure to tobacco smoke, and some of these
actions have named cigarette distributors as well as manufacturers as
defendants. To date we have not been involved in any tobacco related litigation.

POTENTIAL PRODUCT LIABILITY

         There is a possibility that someone could claim personal injury or
property damage resulting from the use of products purchased from the Company.
As a seller of tobacco products, the Company is exposed to potential liability.
Since 1990, Duncan Hill has maintained, for itself and its subsidiaries
(including the Company), product liability insurance. Currently, the amount of
coverage is $1 million per occurrence and $2 million in the aggregate. The
policies are for a period of two years and are currently in effect through
September 17, 2002.

          EMPLOYEES

         As of March 31, 2002, the Company has two full-time salaried management
employees, four hourly full-time employees, and four hourly part-time employees.
This includes its retail store and Monarch pipe manufacturing facility.

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Item 2.  Properties.
-------  -----------

         In November 1999 we leased an operations facility effective January 1,
2000. The facility consists of 6,000 square feet of offices and 11,000 square
feet of warehouse space. We pay $8,000 per month for this facility. We moved
into this facility in March 2000.

         In September 2001 we sub-leased approximately 50% of our warehouse
space and 20% of our office space to another company for $3,000 per month,
reducing our overall cost to $5,000 per month.

         In January, 2002, Kids Stuff sub-leased the remaining office space
available at our facility. In April 2002 substantially all Kids Stuff's assets
were assigned to its major secured creditor, who continues to rent space on a
month-to-month basis.


Item 3.  Legal Proceedings
-------  -----------------

         In the normal course of business, our Company may be involved in
various legal proceedings from time to time. Presently, however, we are involved
in one matter of material litigation. The Danner Press Co. filed suit in the
amount of $114,000 plus interest for past due invoices and a judgment in favor
of Danner has been rendered for the full amount sought. The Company is currently
attempting to reach a settlement with Danner in this regard, although no
assurances can be given that this can be accomplished. Other than the Danner
Press Co., the Company is not a party to any material litigation, whether
routine or incidental to its business, or otherwise. Our financial report
reflects this liability.


Item 4.  Submission of Matters to a Vote of Security Holders.
-------  ----------------------------------------------------
         Not applicable.

                                       9
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                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.
-------  ---------------------------------------------------------

         In May 1998, we sold 460,000 Units to the public; each Unit consisted
of one share of Common Stock, $.001 par value, and two Redeemable Class A Common
Stock Purchase Warrants. Each Class A Warrant entitles the holder to purchase
one share of Common Stock at a price of $5.25 and is exercisable at any time
until the close of business on May 14, 2003. The Common Stock and Class A
Warrants are quoted on the OTC Electronic Bulletin Board of the National
Association of Securities Dealers, Inc. ("NASD") under the symbols "HVGP" and
"HVGPW", respectively. As of May 14, 2002 at 4:00 P.M. Eastern Standard Time,
the last sale price of the Common Stock in the over-the-counter market was
approximately $0.05. The following table reflects the high and low sales prices
(rounded to the nearest penny) for our Common Stock and Class A Warrants for the
periods indicated as reported by the NASD.

                                  COMMON STOCK
                                  ------------

         Fiscal Year Ended December 31, 2001                 HIGH           LOW
         -----------------------------------                 ----           ---
             First Quarter                                  $0.50         $0.19
             Second Quarter                                  0.22          0.12
             Third Quarter                                   0.12          0.08
             Fourth Quarter                                  0.25          0.03

         Fiscal Year Ended December 31, 2000                 HIGH           LOW
         -----------------------------------                 ----           ---
             First Quarter                                  $2.00         $0.19
             Second Quarter                                  1.31          0.28
             Third Quarter                                   0.50          0.25
             Fourth Quarter                                  1.31          0.19

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                                CLASS A WARRANTS
                                ----------------

        Fiscal Year Ended December 31, 2001                  HIGH           LOW
        -----------------------------------                  ----           ---
            First Quarter                                   $0.05         $0.05
            Second Quarter                                   0.06           .02
            Third Quarter                                    0.02           .02
            Fourth Quarter                                   0.02           .02

         Fiscal Year Ended December 31, 2000                 HIGH           LOW
         -----------------------------------                 ----           ---
             First Quarter                                  $1.00         $0.01
             Second Quarter                                  0.38          0.03
             Third Quarter                                   0.13          0.06
             Fourth Quarter                                  0.22          0.02

         The quotations in the tables above reflect inter-dealer prices without
retail markups, markdowns or commissions. We believe that trading activity in
common stock and warrants may be sporadic and that judgments as to share and
warrant prices should be made accordingly.

          Our Company had approximately 20 record holders of its Common Stock
and six record holders of its Class A Warrants as of March 31, 2002. The
foregoing does not include beneficial holders of our Common Stock which are held
in "street name" (i.e. nominee accounts such as Depository Trust Company).


Item 6.  Managements Discussion and Analysis or Plan of Operation.
-------  ---------------------------------------------------------

         This discussion should be read in conjunction with the information in
the financial statements of the Company and notes thereto appearing elsewhere in
this Form 10-KSB.

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RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000.
----------------------------------------------------------------------

         Total net sales for the year ended December 31, 2001 were $1,381,658, a
decrease of 12.9% from 2000 sales of $1,586,741. The decrease in sales reflects
a significant reduction in catalogs mailed in 2001 compared with 2000 due to
limited cash. Net sales primarily include sales of merchandise plus income from
shipping and handling charges.

         Total cost of sales decreased from 79.4% of net sales in 2000 to 55.5%
of net sales in 2001. We attributed this to higher than expected merchandise
cost percentages in 2000, and that sales of certain merchandise were made
through wholesale distribution, which normally is conducted at lesser percentage
margins.

         Selling, General and Administrative expenses during 2001 were
1,349,907, or 97.7% of net sales, compared with $1,548,341, or 97.6% of net
sales, for the year ended December 31, 2000. The higher total expense level over
the two-year period reflects the addition of P&K in August 4, 2000. Higher
corporate overhead expenses were required to sustain the larger operations in
multiple locations. The overhead costs were born by our Company at the corporate
level and, in many cases, were not allocated to P&K. Because Havana was smaller
than P&K, unallocated SG&A amounts total a much higher percentage of total
sales.

         Net loss for the year ended December 31, 2001 was $2,207,216, compared
with a net loss of $1,139,013 for the year 2000. Our loss was due primarily to
increased levels of expense in Selling, General and Administrative expenses,
which increased as a result of the acquisition of P&K and its resulting overhead
requirements. The Company sales, profitability, and viability are dependent upon
the success of the May 1, 2002 mailing of the 23,000 catalogs and the receipt of
$200,000 on terms satisfactory to the Company. In the event the Company does not
receive additional financing, its operations will be materially and adversely
affected,


LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2001, we had a deficit in retained earnings of
$7,640,936, compared to a deficit in retained earnings of $5,433,720 at December
31, 2000. This resulted from an operating loss of $2,207,216 for the year ended
December 31, 2001. For the year ended December 31, 2001, the impact of the
operating loss on the Company's cash position was increased by changes in
working capital, which affected operating activities. The operating activities
provided $2,979,269 in cash through decreases in inventories, accounts
receivable, deferred catalog and deposits, and other assets, but used $1,148,724
from decreases in accounts payable, accrued expenses, and deferred revenue. The
net effect of these changes and non-cash charges of $264,037 relating to
depreciation and amortization, and $15,500 related to common stock issued for
services when added to the Company's net loss, resulted in net cash used by
operating activities of $97,137. For the year ended December 31, 2001, our

                                       12
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Company's investing activities were negligible, and financing activities used
$69,766 to reduce amounts due affiliates. Our ending cash balance decreased
$167,262 to $26,636 at December 31, 2001.

         At December 31, 2000, we had a deficit in retained earnings of
$5,433,720, compared to a deficit in retained earnings of $4,294,707 at December
31, 1999. This resulted from an operating loss of $1,139,013 for the year ended
December 31, 2000. For the year ended December 31, 2000, the impact of the
operating loss on our Company's cash position was increased by changes in
working capital, which affected operating activities. The operating activities
used $146,533 in cash through increases in inventories, deferred catalog expense
and deposits, and other assets, but was partially offset by decreases in
accounts receivable and prepaid expense, and increases in accounts payable of
$201,233 The net effect of these changes and non-cash charges of $178,333
relating to depreciation and amortization, and $42,000 related to common stock
issued for services, when added to the Company's net loss, resulted in net cash
used by operating activities of $863,980.

         For the year ended December 31, 2000, our investing activities used net
cash of $567,560 to Purchase Phillips & King International, Inc. The Company
also used $64,355 in additions of property, plant, and equipment. A total of
$631,915 was used through investing activities in the year 2000.

         During 2000 our financing activities consisted of raising cash of
$342,056 from the sale of stock; borrowing from the line of credit in the amount
of $896,212 to repay term debt in the amount of $577,709; repayment of $29,155
in amounts due affiliates. These activities provided $631,404 in the year 2000.

         During the year 2000, the Company incurred an operating loss of
$1,139,013; it used cash in its operating activities of $863,980; it used
$632,915 through investing activities; it raised cash from financing activities
in the amount of $631,404. The total effect of our activities reduced cash by
$864,491, and produced a year-end cash balance of $193,899.

         In 2000 our Company financed the majority of its business through the
P&K credit facility obtained in October 2000. We discontinued our P&K operations
on March 12, 2002. As a result, we have no overall credit facility at the
current time, but we are attempting to restructure our debt and improve the cash
flow of our operations. In any event we believe that we will require an infusion
of equity capital of approximately $200,000 to continue our business.
For this reason our auditors have added to our fiscal year 2001 a going concern
qualification raising a substantial doubt as to our ability to continue in
business. Our Company is striving to obtain public or private financing. To date
our Company has been unsuccessful in this regard, primarily due to the low price
of our common stock and limited trading volume.

         In the event the Company does raise equity financing, the low price of
our common stock may cause a change of control and require the Company to issue
up to all its remaining authorized but unissued common stock. No assurances can
be given that the Company will obtain additional financing on terms satisfactory
to the Company, if at all.

                                       13
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Item 7.  Financial Statements
-------  --------------------

         The information required by Item 7, and an index thereto commences on
page F-1, which pages follow this page.


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

For a discussion of a change in our Company's certified public accounts we
incorporate by reference our Form 8K dated November 30, 2001 for a comprehensive
discussion of these matters, which include the resignation of Hausser and Taylor
in November 2001 and the engagement of Stefanou & Company, LLP.

                                       14
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549



                       FINANCIAL STATEMENTS AND SCHEDULES

                           DECEMBER 31, 2001 AND 2000



                         FORMING A PART OF ANNUAL REPORT
                 PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934


                              THE HAVANA GROUP INC.


                                      F-1
<PAGE>

                             THE HAVANA GROUP, INC.

                          INDEX TO FINANCIAL STATEMENTS

--------------------------------------------------------------------------------


                                                                          Page

Report of Independent Certified Public Accountants                         F-3
Consolidated Balance Sheet at December 31, 2001                          F-4 ~ 5
Consolidated Statements of Losses for the years
  ended December 31, 2001 and 2000                                         F-6
Consolidated Statements of Deficiency in Stockholders' Equity
  for the years ended December 31, 2001 and 2000                           F-7
Consolidated Statements of Cash Flows for the
years  ended December 31, 2001 and 2000                                    F-8
Notes to Consolidated Financial Statements                              F-9 ~ 22


                                      F-2
<PAGE>

                             STEFANOU & COMPANY, LLP
                          CERTIFIED PUBLIC ACCOUNTANTS

                                1360 Beverly Road
                                    Suite 305
                              McLean, VA 22101-3621
                                  703-448-9200
                               703-448-3515 (fax)
                                                                Philadelphia, PA
--------------------------------------------------------------------------------

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------

To the Board of Directors
The Havana Group, Inc.
Canton, Ohio

         We have audited the accompanying consolidated balance sheet of The
Havana Group, Inc. (the "Company") as of December 31, 2001 and the related
consolidated statements of losses and deficiency in stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits. The accompanying
financial statements of the Company as of December 31, 2000 were audited by
another auditor whose report, dated April 10, 2001, on those statements included
an explanatory paragraph that described the uncertainty regarding the Company's
ability to continue as a going concern.

         We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the 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 our audit provides a reasonable
basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Havana
Group, Inc. as of December 31, 2001, and the results of its operations and its
cash flows for the year ended in conformity with accounting principles generally
accepted in the United States of America.

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note N, the
Company has incurred losses from continuing operations and is experiencing
difficulty in generating sufficient cash flow to meet it obligations and sustain
its operations, which raises substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note N. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

                                                 /s/ STEFANOU & COMPANY, LLP
                                                     -----------------------
                                                   Stefanou & Company, LLP
                                                 Certified Public Accountants
McLean, Virginia
March 12, 2002

                                      F-3
<PAGE>

                             THE HAVANA GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2001


                                     ASSETS

Current assets:
Cash                                                                  $  26,636
Accounts Receivable, net of allowance
                                                                         12,407
Inventories (Note B)
                                                                        182,190
Prepaid Expenses
                                                                          8,863
Other Receivable                                                          7,661
                                                                      ----------
Total Current Assets                                                    237,757

Property, Plant and Equipment, at cost (Note D):
Leasehold Improvement
                                                                        109,320
Furniture and Fixtures
                                                                         64,542
Computers and Data Processing Equipment
                                                                         62,533
Website Development                                                     111,324
                                                                      ----------
                                                                        347,719
                                                                      ----------
Less:  Accumulated Depreciation                                        (182,227)
                                                                      ----------

                                                                        165,492

Other Assets (Note C):
Mailing Lists
                                                                        889,000
Trademarks
                                                                         17,949
Artwork                                                                  35,914
                                                                      ----------
                                                                        942,863
Less: Accumulated Amortization                                         (764,282)
                                                                      ----------
                                                                        178,581
                                                                      ----------

                                                                      $ 581,830
                                                                      ==========

         See accompanying footnotes to consolidated financial statements

                                      F-4
<PAGE>

                             THE HAVANA GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2001


               LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts Payable and Accrued Liabilities                            $   596,806
Due to Affiliates (Note G)                                               47,380
                                                                    ------------
Total Current Liabilities                                               644,186

Net liabilities of discontinued operations (Note O)                     500,993

Commitment and Contingencies (Note F)                                        --

Deficiency in Stockholders' equity (Note I): Preferred stock,
par value $.001 per share; 10,000,000 shares authorized:
Series A - 5,000,000 shares issued and outstanding at
December 31, 2001                                                         5,000
Series B - 1,100,000 shares issued and outstanding at
December 31, 2001 (aggregate liquidation                                  1,100
Preference, including dividends in arrears, totaling
$440,000 as of December 31, 2001)
Common stock, par value $.001 per share; 25,000,000 shares                2,905
Authorized; 2,905,000 shares issued and
outstanding at December 31, 2001
Additional paid-in-capital                                            7,068,582
Accumulated deficit                                                  (7,640,936)
                                                                    ------------
Total Deficiency in Stockholders' Equity                               (563,349)
                                                                    ------------
                                                                    $   581,830
                                                                    ============

         See accompanying footnotes to consolidated financial statements

                                      F-5
<PAGE>

                              THE HAVANA GROUP, INC.
                         CONSOLIDATED STATEMENTS OF LOSSES
                            DECEMBER 31, 2001 AND 2000


                                                         2001           2000
                                                     ------------   ------------

Net Sales                                            $ 1,381,658    $ 1,586,741
Cost of Sales                                            766,976      1,259,776
                                                     ------------   ------------
Gross Profit                                             614,682        326,965

Operating Expenses:
Selling, General and Administrative Expenses           1,349,907      1,548,341
Depreciation and Amortization                            264,037        178,333
                                                     ------------   ------------
Total Operating Expense                                1,613,944      1,726,674

Loss from Operations                                    (999,262)    (1,399,709)

Interest Income (Expense)                                    388         26,878
Other Income (Expenses)                                 (129,589)             -
                                                     ------------   ------------

Loss from continuing operations, before income taxes
and discontinued operations                           (1,128,463)    (1,372,831)

Provision for income taxes                                     -              -
                                                     ------------   ------------
Loss from continuing operations, before discontinued
operations                                            (1,128,463)    (1,372,831)

Income (loss) from discontinued operations (Note O)   (1,078,755)       233,818
                                                     ------------   ------------
Net loss                                              (2,207,216)    (1,139,013)
Preferred stock dividends (Note H)                      (110,000)      (110,000)
                                                     ------------   ------------
Income (loss) available to common stockholders       $(2,317,216)   $(1,249,013)
Loss per common share (basic and assuming dilution):
                                                     $     (0.80)   $     (0.50)
                                                     ============   ============
Continuing operations                                      (0.43)         (0.59)
Discontinued operations                                    (0.37)          0.09
Weighted average shares outstanding                    2,890,753      2,506,667

          See accompanying footnotes to consolidated financial statements

                                       F-6
<PAGE>

<TABLE>
                                                       THE HAVANA GROUP, INC.
                                    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
                                               YEARS ENDED DECEMBER 31, 2001 AND 2000
<CAPTION>

                                          Preferred    Preferred      Common       Common     Additional
                                            Stock        Stock        Stock        Stock       Paid in    Accumulated
                                            Shares       Amount       Shares       Amount      Capital      Deficit        Total
                                         ------------ ------------ ------------ ------------ ------------ ------------  ------------

<S>                                        <C>        <C>            <C>        <C>          <C>          <C>           <C>
BALANCE AT DECEMBER 31, 1999               6,100,000  $     6,100    1,860,000  $     1,860  $ 6,501,322  $(4,294,707)  $ 2,214,575

Shares issued in February 2000 for
cash in connection with private
placement @ $.4044 per share                      --           --      240,000          240       96,815           --        97,055

Shares issued in March 2000 for
cash in connection with private
placement @ $1 per share                          --           --      245,000          245      244,755           --       245,000

Shares issued in June 2000 in
exchange for services valued @
$.7 per share                                     --           --       60,000           60       41,940           --        42,000

Shares issued in August 2000 for the
acquisition of Phillips & King
International, Inc.                               --           --      450,000          450      168,300           --       168,750
Net Loss                                          --           --           --           --           --   (1,139,013)   (1,139,013)
                                         ------------ ------------ ------------ ------------ ------------ ------------  ------------
BALANCE AT DECEMBER 31, 2000               6,100,000  $     6,100    2,855,000  $     2,855  $ 7,053,132  $(5,433,720)  $ 1,628,367
                                         ============ ============ ============ ============ ============ ============  ============

Shares issued on April 15, 2001 in
exchange for services; valued
@ $.31 per share                                  --           --       50,000           50       15,450           --        15,500

Net loss                                          --           --           --           --           --   (2,207,216)   (2,207,216)
                                         ------------ ------------ ------------ ------------ ------------ ------------  ------------
BALANCE AT DECEMBER 31, 2001               6,100,000  $     6,100    2,905,000  $     2,905  $ 7,068,582  $(7,640,936)  $  (563,349)
                                         ============ ============ ============ ============ ============ ============  ============

                                   SEE ACCOMPANYING FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                F-7
</TABLE>
<PAGE>

<TABLE>
                               THE HAVANA GROUP, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                       YEARS ENDED DECEMBER 31, 2001 AND 2000
<CAPTION>

                                                             2001           2000
                                                         ------------   ------------
<S>                                                      <C>            <C>
Cash flows from operating activities:
Net loss for the period from continuing operations       $(1,128,463)   $(1,372,831)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Income (loss) from discontinued operations                (1,078,755)       233,818
Depreciation and Amortization                                264,037        178,333
Common stock issued in exchange for services                  15,500         42,000
(Increase) decrease in:
Receivables                                                  638,350        137,532
Inventory                                                  2,228,771       (138,936)
Prepaid expenses                                               2,007         52,666
Deposits and other assets                                     (7,661)      (166,420)
Deferred catalog expense                                      88,732        (31,375)
Deferred income tax assets                                    29,070             --
Increase (decrease) in:
Accounts payable and other liabilities                    (1,082,284)       201,233
Deferred revenue                                             (66,440)            --
                                                         ------------   ------------
Net cash provided (used) by operating activities             (97,137)      (863,980)

Cash flows from investing activities:
Cash paid to purchase P&K                                         --       (947,115)
Cash acquired in the purchase of P & K                            --        379,555
Purchase of property, plant and equipment                       (359)       (64,355)
                                                         ------------   ------------
Net cash used by investing activities                           (359)      (631,915)

Cash flows from financing activities:
Proceeds from sale of stock                                       --        342,056
Borrowing (repayment) of line of credit                           --        896,212
Repayment of long term debt                                       --       (577,709)
Due to affiliates                                            (69,766)       (29,155)
                                                         ------------   ------------
Net cash provided (used) by financing activities             (69,766)       631,404

Net increase in cash and cash equivalents                   (167,262)      (864,491)

Cash and cash equivalents at the beginning of the year       193,898      1,058,390

Cash and cash equivalents at the end the year            $    26,636    $   193,899
                                                         ============   ============

Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for interest                   $        --    $        --
Cash paid during the year for taxes                               --             --
Common stock issued for services                              15,500         42,000
Common Stock issued in acquisition of P&K                         --        168,750

           See accompanying footnotes to consolidated financial statements

                                        F-8
</TABLE>
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE A - SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows.

Business and Basis of Presentation
----------------------------------

The Havana Group, Inc. ("Havana" or the "Company") is in the mail order business
and sells to customers throughout the United States. The Company sells tobacco,
cigars, smoking pipes and accessories. Products are purchased from a variety of
manufacturers. The consolidated financial statements include the accounts of The
Havana Group, Inc. and its wholly owned subsidiaries, Monarch Pipe Company
("Monarch") and Philips & King, International, Inc. ("P &K"), collectively the
"Company". Monarch Pipe Company manufactures smoking pipes and sells them
exclusively to Havana. P & K sells and distributes tobacco and related products
to wholesalers and retailers in the United States. Subsequent to the date of the
financial statements, the Company disposed of P & K (see Note O) All significant
intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.

Cash Equivalents
----------------

For purposes of the Statements of Cash Flows, the Company considers all highly
liquid investment purchased with a maturity date of three months or less to be
cash equivalents.

Trade Receivables
-----------------

It is the Company's policy to record accounts receivable net of an allowance for
doubtful accounts. The allowance was $5,500 as of December 31, 2001.

Inventories
-----------

Inventories are stated at the lower of cost or market with cost being determined
by the first-in, first-out (FIFO) method.

Property and Equipment
----------------------

Property and equipment are recorded on the basis of cost. For financial
statement purposes, property and equipment will be depreciated using
straight-line method over their estimated useful lives. Depreciation expense
amounted to $52,545 and $68,464 for the years ended December 31, 2001 and 2000,
respectively. Maintenance, repairs, and minor renewals are charged against
earnings when incurred. Additions and major renewals are capitalized.

                                       F-9
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Impairment of Long Lived Assets
-------------------------------

The Company has adopted Statement of Financial Accounting Standards No. 121
(SFAS No. 121). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. SFAS No. 121 also requires assets to be
disposed of be reported at the lower of the carrying amount or the fair value
less costs to sell.

Goodwill
--------

Goodwill represents the excess of the aggregate purchase price over the fair
value of net assets acquired and is being amortized on a straight-line basis
over a period not exceeding five years. The Company reviews impairment of
goodwill whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the assets to
future undiscounted cash flows of the businesses acquired. Should impairment be
identified, a loss would be reported to the extent that the carrying value of
the related goodwill exceeds the fair value of that goodwill based upon the
expected discounted future cash flows.

The Company is required to adopt FAS 141 and 142 on a prospective basis as of
January 1, 2002. As a result of implementing these new standards, goodwill will
continue to be recognized as an asset, but will not be amortized as previously
required by APB Opinion No. 17 "Intangible Assets." Instead, goodwill will be
subject to periodic (at least annual) tests for impairment and recognition of
impairment losses in the future will be based on a new methodology for measuring
impairments prescribed by these pronouncements.

Other Intangible Assets
-----------------------

Other intangible assets consist of mailing list, trademarks, and artwork, which
are amortized using the straight-line method over the estimated useful lives of
the assets which range from five to seven years.

Reclassifications
-----------------

Certain items in the prior year financial statements have been reclassified to
conform to the current year classifications.

Revenue Recognition
-------------------

Sales and the related cost of sales are recognized upon shipment of products.
The Company generally accepts returns of stale or damaged product. Sales returns
are not material.

                                      F-10
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Income Taxes
------------

Income taxes are provided based on the liability method for financial reporting
purposes in accordance with the provisions of Statements of Financial Standards
No. 109, "Accounting for Income Taxes". Under this method 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 are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be removed or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the consolidated statements of operations
in the period that includes the enactment date.

Advertising
-----------

The Company follows the policy of charging the costs of advertising to expenses
incurred. For the years ended December 31, 2001 and 2000, advertising costs were
$179,181 and $415,624, respectively.

Stock Based Compensation
------------------------

The Company accounts for stock transactions in accordance with APB Opinion 25,
"Accounting for Stock Issued to Employees." In accordance with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," the Company has adopted the proforma disclosure requirements.

Concentration of Credit Risk
----------------------------

Financial instruments and related items which potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
trade receivables. The Company places its cash and temporary cash investments
with credit quality institutions. At times, such investments may be in excess of
the FDIC insurance limit. The Company periodically reviews its trade receivables
in determining its allowance for doubtful accounts. The allowance for doubtful
accounts was $5,500 at December 31, 2001.

Comprehensive Income
--------------------

The Company does not have any items of comprehensive income in any of the
periods presented.

Liquidity
---------

As shown in the accompanying financial statements, the Company incurred a loss
from continuing operating of $1,128,463 and $1,372,831 during the year ended
December 31, 2001 and 2000, respectively. The Company's current liabilities
exceeded its current assets by $406,429 as of December 31, 2001.

                                      F-11
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Segment Information
-------------------

The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS 131")
in the year ended December 31, 1998. SFAS establishes standards for reporting
information regarding operating segments in annual financial statements and
requires selected information for those segments to be presented in interim
financial reports issued to stockholders. SFAS 131 also establishes standards
for related disclosures about products and services and geographic areas.
Operating segments are identified as components of an enterprise about which
separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision making group, in making decisions on how
to allocate resources and assess performance. The information disclosed herein,
materially represents all of the financial information related to the Company's
principal operating segments.

Earnings (Loss) Per Share
-------------------------

The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," specifying the computation, presentation and disclosure
requirements of earnings per share information. Basic earnings (loss) per share
has been calculated based upon the weighted average number of common shares
outstanding. Stock options and warrants will be excluded as common stock
equivalents in the diluted earnings per share because they are either
antidilutive, or their effect is not material. The weighted average number of
common shares outstanding used in the computation of earnings (loss) per share
was 2,890,753 and 2,506,667 for each of the periods ended December 31, 2001 and
2000 respectively.

New Accounting Pronouncements
-----------------------------

In March 2000, the FASB issued interpretation No. 44 ("FIN 44"), "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25". FIN 44 clarifies the application of APB No. 25 for (a) the
definition of employee for purposes of applying APB No. 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequences of various modifications to previously fixed stock
option or award, and (d) the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 is effective July 2, 2000 but certain
conclusions cover specific events that occur after either December 15, 1998 or
January 12, 2000. The adoption of FIN 44 did not have an affect on the Company's
financial statements but may impact the accounting for grants or awards in
future periods.

                                      F-12
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

New Accounting Pronouncements (Continued)
-----------------------------------------

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. ("FAS") 141, "Business Combinations" ("FAS
141") and FAS 142, "Goodwill and Other Intangible Assets" ("FAS 142"). FAS 141
addresses the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination. FAS 142 addresses the
initial recognition and measurement of intangible assets acquired outside of a
business combination, whether acquired individually or with a group of other
assets, and the accounting and reporting for goodwill and other intangibles
subsequent to their acquisition. These standards require all future business
combinations to be accounted for using the purchase method of accounting.
Goodwill will no longer be amortized but instead will be subject to impairment
tests at least annually. The Company is required to adopt FAS 141 and FAS 142 on
a prospective basis as of January 1, 2002; however, certain provisions of these
new standards may also apply to any acquisitions concluded subsequent to June
30, 2001. As a result of implementing these new standards, the Company will
discontinue the amortization of goodwill as of December 31, 2001. The Company
does not believe that the adoption of FAS 141 and 142 has a material impact on
its consolidated financial statements.

In October 2001, the Financial Accounting Standards Board issued FAS 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144").
FAS 144 addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. This statement supersedes FAS 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" ("FAS 121") and related literature and establishes a single accounting
model, based on the framework established in FAS 121, for long-lived assets to
be disposed of by sale. The Company is required to adopt FAS 144 no later than
January 1, 2002. The Company does not believe that the adoption of FAS 144 will
have a material impact on its consolidated financial statements.

NOTE B - INVENTORIES

The Company's inventories consist of the following at December 31, 2001:

Tobacco and cigars                                            $ 167,917
Catalogs                                                          8,329
Supplies                                                          5,944
                                                              -----------
                                                              $ 182,190

NOTE C - INTANGIBLE ASSETS

The costs and accumulated amortization of intangible assets at December 31, 2001
are summarized as follows:

Trademark                                                          17,949
Artwork                                                            35,914
Mailing List                                                      889,000
Less:  accumulated amortization                                 (764,282)
                                                                ----------
Intangible assets, net                                          $ 178,581
                                                                ==========

                                      F-13
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE C - INTANGIBLE ASSETS (CONTINUED)

Amortization expense charged to operations amounted to $211,492 and $109,869 for
the years ended December 31, 2001 and 2000, respectively.

NOTE D - PROPERTY, PLANT AND EQUIPMENT

The Company's property, plant and equipment at December 31, 2001 consists of the
following:

Leasehold Improvement                                          $  109,320
Furniture & Fixtures                                               64,542
Computer and Software                                              62,533
Website Development                                               111,324
                                                               -----------
   Total                                                          347,719
Accumulated Depreciation                                         (182,227)
                                                               -----------
                                                               $  165,492
                                                               ===========

Depreciation expense included as a charge to operations amounted to $52,545 and
$68,464 for the years ended December 31, 2001 and 2000, respectively.

NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("SFAS 107"), defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties. The Company includes fair value
information in the notes to consolidated financial statements when the fair
value of its financial instruments is materially different from the book value.
The carrying value of the Company's cash and cash equivalents, short-term debt
securities held to maturity, time deposits, receivables, other current assets,
accounts payable, and accrued liabilities, included in the accompanying balance
sheets, approximate the estimated fair value of those instruments because of
their short-term nature. The fair value of the notes payable to banks based on
the interest rates currently available for borrowings with similar terms and
maturities approximates the carrying amount of those borrowings. The fair value
of the amounts due to and from related party cannot be determined due to the
uncertainty as to the timing of repayment.

NOTE F - COMMITMENTS AND CONTINGENCIES

Operating Lease
---------------

The Company has entered into a three-year operating lease effective January 1,
2000 for warehouse and office space. Total future minimum lease payments
required under this noncancellable operating lease for the year ending December
31, 2002 is $96,000. Total rent expense was $83,689 and $154,340 for the years
ended December 31, 2001 and 2000, respectively.

                                      F-14
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE F - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Employment Agreement
--------------------

The Company has an employment agreement with the Company's President and Chief
Executive Officer. In addition to salary and benefit provisions, the agreement
includes defined commitments should the employee terminate the employment with
or without cause. The Company has consulting agreements with outside
contractors, certain of whom are also Company stockholders.

Legal Proceedings and Claims
----------------------------

The Company operates as a marketer of tobacco and related products. The industry
by its nature is subject to government regulations and risks related to the
personal health of tobacco consumers. The Company is at times subject to legal
proceedings and claims which arise in the ordinary course of business.
Management evaluates each claim and provides for any potential loss when the
claim is probable and estimable.

In February 2001, Danner Press Corporation filed a complaint against the Court
of Common Pleas, Stark County of the State of Ohio. The complaint alleges a
breach of contract. The Company received a judgment in the Plaintiff's favor in
April 2002 in the amount of $118,121. The amount due Danner Press Corporation of
$118,121 is included in accrued liabilities at December 31, 2001.

NOTE G - RELATED PARTY TRANSACTIONS

At December 31, 2001, Duncan Hill, Inc., the parent of The Havana Group, Inc.,
owns 79% of the outstanding voting capital stock of Kids Stuff, Inc. (Kids
Stuff). The Company entered into a contract with Kids Stuff in 2000 that Kids
Stuff would provide administrative, executive, and accounting services at a cost
of $30,000 per year plus shipment and warehouse services on a per order basis.
Total costs charged to Havana in 2001 and 2000 amounted to $47,380 and $35,247,
respectively.

NOTE H - EARNINGS (LOSS) PER SHARE

Basic and fully diluted losses per share are calculated by dividing net income
(loss) available to common shareholders by the weighted average of common shares
outstanding during the year. The Company has no potentially dilutive securities,
options, warrants or other rights outstanding. The following table sets forth
the computation of basic and diluted earnings (loss) per share:

                                                      2001             2000
    Net income (loss) available to
       Common stockholders (after preferred      $  (2,317,216)   $  (1,249,013)
                                                 ==============   ==============
       Stock dividends of $110,000 per year)
    Basic and diluted earning (loss) per share   $       (0.80)   $       (0.50)
                                                 ==============   ==============
        Continuing operation                             (0.43)           (0.59)
        Discontinued operation                           (0.37)            0.09
    Basic and diluted weighted average
      Number of common shares outstanding            2,890,753        2,506,667

                                      F-15
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE I - STOCKHOLDERS' EQUITY

Common Stock
------------

The Company is authorized to issue 25,000,000 shares of common stock with a par
value of $.001 per share. As of December 31, 2001, 2,905,000 shares were issued
and outstanding.

The Company is not currently subject to any contractual arrangements which
restricts its ability to pay cash dividends. The Company's Certificate of
Incorporation prohibits the payment of cash dividends on the Company's Common
Stock in excess of $.05 per share per year so long as any Serial Preferred Stock
remains outstanding unless all accrued and unpaid dividends on Serial Preferred
Stock has been set apart and there are no arrearages with respect to the
redemption of any Serial Preferred Stock.

In February 2000, the Company's CEO purchased 240,000 unregistered shares of the
Company's common stock at a price of $.4044 per share for total proceeds of
$97,055.

In March 2000, the Company sold 245,000 unregistered common shares to seven
investors for $245,000. This transaction was part of a planned expansion and
acquisition of P&K., to be followed by a larger registration and offering of the
Company's common stock. When this was delayed due to market and business
conditions, the Company agreed to issue 245,000 additional common shares to
adjust the price to the approximately the market price at the time of the
original transaction. The shares have not been issued at December 31, 2001.

In 2000, the Company issued 60,000 shares of common stock to consultants for
$42,000 of services rendered during 2000. The shares issued to the consultants
were based upon the value of the services rendered. In addition, the Company
issued 450,000 shares of common stock in connection with the acquisition of P&K.

In April 2001, the Company issued 50,000 shares of common stock to consultants
for $15,500 of services rendered. The shares issued to the consultants were
based upon the value of the services rendered.

Series A Preferred Stock
------------------------

The Company is authorized to issue up to 10,000,000 shares of Preferred Stock in
one or more series and to fix the rights, preferences, privileges, and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidating preferences, and the number of shares
constituting any series or the designation of such series. Duncan Hill, Inc.,
the parent of the Company owns 5,000,000 shares of Series A Preferred Stock
(Series A) $.001 par value. The holders of the Series A stock are entitled to
one vote for each share held of record on all matters submitted to a vote of the
stockholders.

The Series A stock is not subject to redemption and has no conversion rights or
rights to participate in dividend payments. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, each share of Series A stock has a liquidation preference of $.001 per
share.

                                      F-16
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE I - STOCKHOLDERS' EQUITY (CONTINUED)

Series B Preferred Stock
------------------------

The Company has issued 1,100,000 shares of its Series B Convertible Preferred
Stock (Series B) $.001 par value to Duncan Hill, Inc. The Series B stock has the
same voting privileges as the Common Stock. Each share of Series B stock is
convertible into one share of the Company's Common stock at the option of either
the holder or the Company upon the Company's net pre-tax profit reaching
$500,000 in any given calendar year. The holder of each share of Series B
Preferred Stock will be entitled to receive, when, as, and if declared by the
Board of Directors of the Company, out of funds legally available therefor,
cumulative quarterly cash dividends at the rate of $.025 per share, quarterly on
March 31, June 30, September 30, and December 31 commencing with March 31, 1998
before any dividend shall be declared, set apart for, or paid upon the Common
Stock for such year, and the remainder of the surplus or net earnings applicable
to the payment of dividends shall be distributed as dividends among the holders
of Common Stock as and when the Board of Directors determines. There were no
dividends declared or paid during 2001 or 2000 on the Series B Preferred Stock.
Dividends in arrears on the Series B preferred stock amount to $.40 per share or
$440,000 in the aggregate at December 31, 2001.

The Series B stock is not subject to redemption. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, each share of Series B stock has a liquidation preference of $.001 plus
dividends in arrears, which is subordinated to the liquidation preference of the
Series A stock.

NOTE J - WARRANTS AND STOCK OPTIONS

Class A Warrants
----------------

The following table summarizes the changes in warrants outstanding and the
related prices for the shares of the Company's common stock issued to
shareholders at December 31, 2001.

Class A Warrants (Continued)
----------------------------

<TABLE>
<CAPTION>
                    Warrants Outstanding                             Warrants Exercisable
                    --------------------                             --------------------
                                             Weighted
                                              Average
                                             Contractual
                              Number            Life               Number           Weighted Average
       Exercise prices:     Outstanding       (Years)            Exercisable         Exercise Price
       ----------------     -----------       -------            -----------         --------------

<S>              <C>          <C>               <C>                <C>                    <C>
                 $6.00          200,000         10.0                 200,000              $ 6.00
                 $5.25        2,658,000          5.0               2,658,000              $ 5.25
                 $0.10          500,000          5.0                 500,000              $ 0.10
                                -------          ---                 -------              ------
                              3,358,000          5.3               3,358,000              $ 4.53
                              =========          ===               =========              ======
</TABLE>

                                      F-17
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE J - WARRANTS AND STOCK OPTIONS (CONTINUED)

Transactions involving the Company's warrant issuance are summarized as follows:

                                            Number      Weighted Average
                                           of shares     Exercise Price
                                           ---------     --------------

     Outstanding at December 31, 1999      2,858,000        $   5.30
                                           ==========       =========
     Granted                                      --              --
     Exercised                                    --              --
     Cancelled                                    --              --
                                           ----------       ---------
     Outstanding at December 31, 2000      2,858,000        $   5.30
                                           ==========       =========
     Granted                                 500,000            0.10
     Exercised                                    --              --
     Cancelled                                    --              --
                                           ----------       ---------
     Outstanding at December 31, 2001      3,358,000        $   4.53
                                           ==========       =========

The weighted-average fair value of warrants granted to shareholders during the
years ended December 31, 2001 and 2000 and the weighted-average significant
assumptions used to determine those fair values, using a Black-Scholes option
pricing model are as follows:

                                                           2001           2000
                                                           ----           ----
   Weighted average grant date fair value per share:      $0.15          $0.36
   Significant assumptions (weighted-average):
       Risk-free interest rate at grant date              3.89%          6.40%
       Expected stock price volatility                      21%            57%
       Expected dividend payout                               -              -
       Expected option life-years (a)                       5.0            5.0
       (a) The expected option life is based on contractual expiration dates.

Stock Options
-------------

The following table summarizes the changes in options outstanding and the
related prices for the shares of the Company's common stock issued to
shareholders at December 31, 2001.

<TABLE>
<CAPTION>
                     Options Outstanding                              Options Exercisable
                     -------------------                              -------------------
                                             Weighted
                                              Average
                                             Contractual
                              Number            Life               Number           Weighted Average
       Exercise prices:     Outstanding       (Years)            Exercisable         Exercise Price
       ----------------     -----------       -------            -----------         --------------
<S>              <C>             <C>            <C>                 <C>                    <C>
                 $3.50           80,000         10.0                80,000                 $ 3.50
               $0.4044           60,000          5.0                60,000               $ 0.4044
               $0.4044          200,000         10.0               200,000               $ 0.4044
                                -------         ----               -------               --------
                                340,000         9.12               340,000                 $ 1.13
                                =======         ====               =======                 ======
</TABLE>

                                      F-18
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE J - WARRANTS AND STOCK OPTIONS (CONTINUED)

Transactions involving the Company's options issuance are summarized as follows:

                                                Number      Weighted Average
                                               of shares     Exercise Price
                                               ---------     --------------

     Outstanding at December 31, 1999           340,000       $    5.40
                                               =========      ===========
     Granted                                    260,000            0.4044
     Exercised                                       --              --
     Cancelled                                 (260,000)           5.40
                                               ---------      -----------
     Outstanding at December 31, 2000           340,000       $    1.13
                                               =========      ===========
     Granted                                         --              --
     Exercised                                       --              --
     Cancelled                                       --              --
                                               ---------      -----------
     Outstanding at December 31, 2001           340,000       $    1.13
                                               =========      ===========

The weighted-average fair value of stock options granted to shareholders during
the years ended December 31, 2001 and 2000 and the weighted-average significant
assumptions used to determine those fair values, using a Black-Scholes option
pricing model are as follows:

                                                            2001           2000
                                                            ----           ----
   Weighted average grant date fair value per share:       $0.15         $ 0.36
   Significant assumptions (weighted-average):
       Risk-free interest rate at grant date               3.89%          6.40%
       Expected stock price volatility                       21%            57%
       Expected dividend payout                                -              -
       Expected option life-years (a)                       9.12           9.12
       (a)The expected option life is based on contractual expiration dates.

If the Company recognized compensation cost for the warrants and non-qualified
employee stock option plan in accordance with SFAS No. 123, the Company's pro
forma net loss and net loss per share would have been $2,240,766 and $(0.81) in
2001 and $1,256,013 and $(0.55) in 2000, respectively.

NOTE K - STOCK INCENTIVE PLAN

The Company maintains a Stock Incentive Plan. Under the Stock Incentive Plan,
the Compensation Committee of the Board of Directors may grant stock incentives
to key employees and the directors of the Company pursuant to which a total of
400,000 shares of common stock may be issued; provided, however, that the
maximum amount of common stock with respect to which stock incentives may be
granted to any person during any calendar year shall be 20,000 shares, except
for a grant made to a recipient upon the recipient's initial hiring by the
Company, in which case the number shall be a maximum of 40,000 shares. These
numbers are subject to adjustment in the event of a stock split and similar
events. Stock incentive grants may be in the form of option, stock appreciation
rights, stock awards, or a combination thereof. No stock incentives were granted
under the Stock Incentive Plan in 2001 and 2000.

                                      F-19
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE L - INCOME TAXES

The Company has adopted Financial Accounting Standard number 109 which requires
the recognition of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial statement or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes are
insignificant.

For income tax reporting purposes, the Company's aggregate unused net operating
losses approximate $4,463,216, which expire through 2021. The deferred tax asset
related to the carryforward is approximately $1,517,400. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit, since in the opinion of management based upon the earning history of
the Company, it is more likely than not that the benefits will be realized.

Components of deferred tax assets as of December 31, 2001 are as follows:

              Non Current:
              Net operating loss carryforward                  $   1,517,400
              Valuation allowance                                (1,517,400)
                                                               -------------
              Net deferred tax asset                           $         --

NOTE M - ACQUISITION OF PHILLIPS & KING INTERNATIONAL, INCORPORATED

In August 2000, The Havana Group acquired 100% of the common stock of Phillips &
King International, Inc., a distributor of tobacco and related products to
wholesalers and retailers in the United States (see Note O). The value of assets
acquired (excluding goodwill) was $2,927,799 and liabilities assumed was
$1,918,723, for a net value of $1,009,076. The excess of the aggregate purchase
price over the fair market value of net assets acquired of $106,789 was recorded
as goodwill. The acquisition is being accounted for as a purchase in accordance
with APB 16 and, accordingly, the operating results of the acquired company have
been included in the Company's financial statements since the date of
acquisition.

The following summarizes the acquisition of P&K:

Cash paid                                                       $   (900,000)
Issuance of 450,000 shares of  common  stock                        (168,750)
Acquisition costs                                                    (47,115)
Assets acquired                                                    2,927,799
Liabilities assumed                                               (1,918,723)
Goodwill                                                             106,789
                                                                -------------
                                                                $         --
                                                                =============

                                      F-20
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000


NOTE N - GOING CONCERN MATTERS

The accompanying statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the financial statements during the
years ended December 31, 2001 and 2000, the Company incurred losses from
continuing operations of $1,128,463 and $1,372,831, respectively. These factors
among others may indicate that the Company will be unable to continue as a going
concern for a reasonable period of time.

The Company's existence is dependent upon management's ability to develop
profitable operations and resolve it's liquidity problems. Management
anticipates the Company will attain profitable status and improve its liquidity
through the continued developing, marketing and selling of its products and
additional equity investment in the Company. The accompanying financial
statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.

In order to improve the Company's liquidity, the Company is actively pursuing
additional equity financing through discussions with investment bankers and
private investors. There can be no assurance the Company will be successful in
its effort to secure additional equity financing.

If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations or the resolution of its liquidity problems.

NOTE O- SUBSEQUENT EVENT

On March 12, 2002, the Company reached a definitive agreement to sell the net
assets of its tobacco distribution business for consideration to be determined
based upon future sales and assumption of $2,196,076 of the debt of Phillips &
King, International, Inc. Net liabilities of $500,993 relating to the sale have
been segregated on the December 31, 2001 Consolidated Balance Sheet. The results
of operations for all years presented have been restated for the discontinued
tobacco distribution business.

Net liabilities of discontinued operations at December 31, 2001 are as follows:

Assets sold                                                    $ 1,695,083
Liabilities assumed                                              2,196,076
                                                               ------------
Net liabilities of discontinued operations                     $  (500,993)
                                                               ============

Operating results for the discontinued operations for the years ended December
31, 2001 and 2000 were:

                                              2001                  2000
                                              ----                  ----
Sales                                     $ 8,113,898           $ 4,421,154
Expenses                                   (9,192,653)           (4,187,336)
                                          ------------          ------------
Net income (loss)                         $(1,078,755)          $   233,818
                                          ============          ============

                                      F-21
<PAGE>

                             THE HAVANA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000

<TABLE>
<CAPTION>
<S>                                                                                       <C>
NOTE O- SUBSEQUENT EVENT (CONTINUED)

Included in the tobacco distribution liabilities assumed by the buyer was
long-tem debt, which consisted of the following: at December 31, 2001:

Note payable, trade creditors of P&K, interest at 7% per annum, due in quarterly
installments of $29,905, including interest, through June 2005, secured by
substantially all assets of P&K, subordinate to other secured indebtedness.               $ 363,464

Note  payable,   Cuba  Libre,   interest  at  7%  per  annum,  due  in  quarterly
installments  of  $23,603,  including  interest,  through  June 2005.  P&K was in
default on this note at December 31, 2001.                                                  327,522

Note  payable,  Cuba Libre,  interest at 7% per annum  (starting in August 2002),
due in quarterly installments of $11,506,  including interest,  commencing August
2002 through June 2005.                                                                     125,000
                                                                                          ----------
                                                                                          $ 815,986
                                                                                          ==========
</TABLE>

                                      F-22
<PAGE>

                                    PART III

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

(a)      Identification of Directors
         ---------------------------

         The names, ages and principal occupations of the Company's present
directors, and the date on which their term of office commenced and expires, are
as follows:
                                            First
                                 Term of    Became        Principal
Name                    Age      Office     Director      Occupation
----                    ---      --------   --------    --------------

William L. Miller       65        (1)        1997       Chairman of the
                                                        Board, Chief
                                                        Executive Officer,
                                                        And Principal
                                                        Financial Officer of
                                                        The Company

John W. Cobb, Jr.       60        (1)        1997       Director of Marketing
                                                        Global Outreach
                                                        University of Maryland

Clark D. Swisher        50        (1)       3/31/00     Vice President,
                                                        Employee Benefits
                                                        Division of Leonard
                                                        McCormick Agency
-----------
(1)      Directors are elected at the annual meeting of stockholders and hold
         office until the following annual meeting.

(b)      Identification of Executive Officers.
         -------------------------------------

         William L. Miller is Chairman of the Board, Chief Executive Officer,
Chief Financial Officer and Treasurer of the Company. Gary J. Corbett is
President.

         The terms of all officers expire at the annual meeting of directors
following the annual stockholders meeting. Subject to their contract rights to
compensation, if any, the Board of Directors may remove officers, either with or
without cause, and a successor elected by a majority vote of the Board of
Directors, at any time.

                                       15
<PAGE>

Business Experience
-------------------

         William L. Miller has been Chairman of the Board of Directors of the
Company and Chief Executive Officer since December 1997. Mr. Miller has in the
past and is currently serving as the Company's Chief Financial Officer. He
previously served as President of the Company from December 1997 - March 1999.
Previously, he was the sole director and executive officer of Carey from 1984 to
December 1997. Mr. Miller has held identical positions at Kids Stuff, Inc. from
its formation in July 1996 to the present time. Mr. Miller had been a director
of Perfectly Safe, Inc. and its Vice President since Duncan Hill formed it in
1990 until July 1996. Mr. Miller is President, Founder and a director of Duncan
Hill. He holds a Bachelors Degree in Mechanical Engineering from Purdue
University and a Masters Degree in Business Administration from Indiana
University.

         Gary J. Corbett has been President of the Company since February 1999.
Mr. Corbett has over 25 years of management experience in the tobacco industry
and has served the industry as a retail owner, franchise merchandiser, tobacco
manufacturer, and direct marketing executive. Mr. Corbett was Vice President,
Fred Stoker & Sons, Dresden, Tennessee, a manufacturer and direct marketer of
tobacco products from 1992 to 1998, and Vice President and General Manager,
World Tobacco, Ltd., Louisville, Kentucky from 1980 to 1992. Effective in April
2002 Mr. Corbett was laid off due to cash limitations of the Company.

         John W. Cobb, Jr., has been a Director of the Company since December
1997. Mr. Cobb is the Director of Marketing, Global Outreach, at the University
of Maryland since October 1999. Previously, Mr. Cobb was a Senior Vice President
of Marketing at McGraw-Hill Continuing Education center in Washington, DC from
1981-1999. From 1979-1981, he was the Vice President of Marketing and
Syndication Sales for C.B.S., Inc., Columbia House Division in New York and Vice
President, Direct Mail Marketing/Special Markets for Bell & Howell Consumer
Products Group in Chicago (1969-1979). As a result of his experience, he has a
comprehensive understanding of the direct mail business. Mr. Cobb has served as
a director of Duncan Hill from 1993 to the present time. Mr. Cobb holds a
Bachelors Degree in Economics, with a Minor in Marketing from Central College of
Iowa and a Masters Degree in Marketing with a Minor in Management from the
University of Iowa Graduate School of Business.

         Clark D. Swisher has been Vice President of the Employee Benefits
Division of the Leonard-McCormick Agency, a general insurance agency, since
1984. Mr. Swisher's professional background includes membership in the National
Association of Life Underwriters and the University of Akron Business Advisory
Council. Mr. Swisher has been a director of Duncan Hill, Inc. since 1995.

         The Company does not have any committees of the Board of Directors
although it may have committees in the future. The Company currently has no
independent directors. The Company is attempting to identify and appoint two
individuals who are not affiliated with the Company or its affiliates as a
director. Since these individuals have not yet been identified, there can be no
assurance given that the Company will be able to attract suitable candidates to
serve as directors. If successful, these individuals would provide the Company
with two independent directors and the Board would establish a Compensation
Committee and an Audit Committee. The Audit Committee, which will consist of at
least a majority of outside directors who are not affiliated with the Company,
will among other things, make recommendations to the Board of Directors
regarding the independent auditors for the Company, approve the scope of the

                                       16
<PAGE>

annual audit activities of the independent auditors and review audit results and
have general responsibility for all auditing related matters. The Compensation
Committee will consist entirely of outside directors who are not affiliated with
the Company, Kids Stuff or Duncan Hill. The Compensation Committee will review
and recommend to the Board of Directors the compensation structure for the
Company's officers and other management personnel, including salary rates,
participation in incentive compensation and benefit plans, fringe benefits,
non-cash perquisites and other forms of compensation.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than ten percent
stockholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. To Management's knowledge, no
officer, director or person owning more than 10% of the Company's Common Stock
filed any reports late during its fiscal year ended December 31, 2001.

                                       17
<PAGE>

Item 10. Executive Compensation
-------- ----------------------

                  The following table provides a summary compensation table with
respect to the compensation of William L. Miller, the Company's Chief Executive
Officer (CEO) for the past three years.

<TABLE>
SUMMARY COMPENSATION TABLE
--------------------------
<CAPTION>

================== ======= =========== ========== =========== ======================================== =============
                                                                       Long Term Compensation
------------------ ------- ----------- ---------- ----------- ---------------------------------------- -------------
                           Annual Compensation                     Awards                  Payouts
------------------ ------- ----------- ---------- ----------- ------------ ------------- ------------- -------------

       (a)           (b)      (c)         (d)         (e)          (f)          (g)           (h)           (i)

                                                    Other                                                  All
Name                                                Annual     Restricted                                 Other
And                                                 Compen-      Stock                       LTIP         Compen-
Principal                                           sation      Award(s)     Number of     Payouts        sation
Position            Year    Salary ($) Bonus ($)      ($)       ($)  (3)      Options        ($)            ($)
------------------ ------- ----------- ---------- ----------- ------------ ------------- ------------- -------------
<S>                <C>       <C>          <C>        <C>          <C>          <C>           <C>           <C>
                   2001      -0-(4)       -0-        -0-          -0-          -0-           -0-           -0-
W. Miller,
Chief Executive    2000      -0-(4)       -0-        -0-          -0-        200,000 (3)     -0-           -0-
Officer (1)(2)
                   1999       -0-         -0-        -0-          -0-        200,000         -0-           -0-
================== ======= =========== ========== =========== ============ ============= ============= =============
</TABLE>

(1)      Does not include 240,000 shares sold to Mr. Miller on February 7, 2000
         at a price of $.4044 per share. See "Certain Transactions" for a
         description of this transaction.

(2)      Mr. Miller's employment contract required him to be paid a salary of
         $50,000 for 1999. On June 30, 1999, Mr. Miller modified his employment
         agreement to receive 200,000 Class A Warrants identical to those sold
         to the public in exchange for $42,000 in accrued salary. Accordingly,
         Mr. Miller did not receive any cash compensation in 1999 but did
         receive 200,000 Class A Warrants.

(3)      Represents the regrant of options at $.4044 per share following the
         cancellation of an equivalent number of options.

(4)      Salary has been accrued but not paid at $100,000 per year

(5)      OPTION GRANTS TABLE

      The information provided in the table below provides information with
respect to individual grants of stock options (or warrants) during fiscal 2000
to the Company's Chief Executive Officer.

                                       18
<PAGE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END

OPTION/WARRANT VALUES

         The information provided in the table below provides information with
respect to each exercise of the Company's stock option during fiscal 2001 by the
Company's Chief Executive Officer and the fiscal year end value of the Company's
unexercised options.

<TABLE>
<CAPTION>
========================== ============== =============== ========================= =============================
           (a)                  (b)            (c)                  (d)                         (e)

                                                                Number of
                                                                Securities                    Value of
                                                                Underlying                  Unexercised
                               Shares                           Unexercised                  In-the-Money
                              Acquired                         Options/Warrants           Options/Warrants
                                 on           Value              at FY-End (#)              at Fy-End($)
                              Exercise       Realized           Exercisable/                 Exercisable/
         Name                    (#)          ($)(1)            Unexercisable             Unexercisable (1)
-------------------------- -------------- --------------- ------------------------- -----------------------------
<S>                             <C>            <C>            <C>                            <C>
William L. Miller               -0-            -0-            400,000/-0-                    -0-/-0-

========================== ============== =============== ========================= =============================
</TABLE>

(1)      The aggregate dollar values in column (c) and (e) are calculated by
         determining the difference between the fair market value of the Common
         Stock underlying the options/warrants and the exercise price of the
         options/warrants at exercise or fiscal year end, respectively. Column
         (e) is based upon a year-end value of Common Stock of approximately
         $.1875 per share. It does not reflect the value of the Warrants, which
         could be sold in the open market.

                                       19
<PAGE>

REPORT ON REPRICING OF OPTIONS

         On February 4, 2000, the Board of Directors as an incentive to its
executive officers and directors cancelled all outstanding options held by them
and regranted equivalent options at an exercise price of $.4044 per share, which
was equal to the then fair market value of the Company's Common Stock. As a
result of such action, we cancelled and regranted options to purchase 200,000
shares to William L. Miller, options to purchase 30,000 shares to each of John
W. Cobb and Peter Stokkebye VI and options to purchase 10,000 shares to Gary
Corbett.

INCENTIVE COMPENSATION PLAN

         1997 LONG-TERM STOCK INCENTIVE PLAN. In November 1997, the Company's
majority stockholder approved the adoption of the Company's 1997 Long-term
Incentive Plan (the "Incentive Plan"). Under the Incentive Plan, the Board of
Directors or a Compensation Committee of the Board of Directors consisting of
not less than three members may grant stock incentives to employees of the
Company pursuant to which a total of 400,000 shares of common stock may be
issued: provided, however, that the maximum amount of Common Stock with respect
to which stock incentives may be granted to any person during any calendar year
shall be 20,000 shares, except for a grant made to a recipient upon the
recipient's initial hiring by the Company, in which case the number shall be a
maximum of 40,000 shares. These numbers are subject to adjustment in the event
of a stock split and similar events. Stock incentive grants may be in the form
of options, stock appreciation rights, stock awards or a combination thereof.

         Options granted under the Incentive Plan may be either "Incentive stock
options," which qualify for special tax treatment under Section 422 of the
Internal Revenue Code (the "Code"), or nonstatutory stock options, which do not
qualify. Incentive stock options may only be granted to persons who are
employees of the Company. Options will expire at such time as the compensation
Committee determines, provided that no stock option may be exercisable later
than ten years from its grant, except that the maximum term of any incentive
stock option granted to a person who owns, directly or indirectly, 10% or more
of the combined voting power of the Company's capital stock (a "10%
Shareholder") shall be five years. If an optionee ceases to be an employee by
reason of death, incapacity of retirement, the option shall terminate fifteen
months after the optionee ceases to be an employee. If an optionee ceases to be
an employee because of resignation with the consent of the compensation
committee, the option will terminate three months after the optionee ceases to
be an employee. If an optionee ceases to be an employee or director for any
other reason, the option will expire thirty days after the optionee ceases to be
an employee.

                                       20
<PAGE>

         The option price per share is determined by the Compensation Committee,
except for incentive stock options which cannot be less than 100% of the fair
market value of the Common Stock on the date such option is granted or less than
110% of such fair market value if the optionee is a 10% shareholder. Payment of
the exercise price may be made in cash, or, unless otherwise provided by the
Compensation Committee, in shares of Common Stock delivered to the Company by
the optionee or by withholding of shares issuable upon exercise of the option or
in a combination thereof. Each Option shall be exercisable in full or in part
not less than six months after the date the Option is granted, or may become
exercisable in one or more installments at such later time or times as the
Committee shall determine. In the event of a "change in control" as defined
under the Incentive Plan, generally any stock incentives which have been
outstanding for at least six months shall be immediately exercisable. Each
option shall be exercised in full or in part. Options are not transferable other
than by will or the laws of descent and distribution, and may be exercised
during the life of the employee or director only by him or her. No Incentive
Stock Options may be granted under the Incentive Plan after November 8, 2007.
However, any options outstanding on November 8, 2007 will remain in effect in
accordance with their terms.

         The Incentive Plan also provides for the granting of stock appreciation
rights ("SAR"), which entitle the holder to receive upon exercise an amount in
cash and/or stock which is equal to the appreciation in the fair market value of
the Common stock between the date of the grant and the date of exercise. The
number of shares of Common Stock to which a SAR relates, the period in which it
can be exercised, and other terms and conditions shall be determined by the
Compensation committee, provided, however, that such expiration date shall not
be later than ten years from the date of the grant. SARS are not transferable
other than by will or the laws of descent and distribution, and may be exercised
during the life of the grant only by the grantee. The SARS are subject to the
same rules regarding expiration upon a grantee's cessation of employment or
directorship, as pertains to options, discussed above.

         The Compensation Committee may also award shares of Common Stock
("stock awards") in payment of certain incentive compensation, subject to such
conditions and restrictions as the committee may determine. All shares of Common
Stock subject to a stock award will be valued at not less than 100% of the fair
market value of such shares on the date the stock award is granted. The number
of shares of Common stock which may be granted as a stock award in any calendar
year may not exceed 80,000.

         The Incentive Plan will be administered by the compensation Committee,
which has the authority to prescribe, amend and rescind rules and regulations
relating to the Plan, to accelerate the exercise date of any option, to
interpret the Plan and to make all necessary determinations in administering the
Plan. The Incentive Plan will remain in effect until such time as it is
terminated by the Board of Directors. The Incentive Plan may be amended by the
Board of Directors upon the recommendation of the Compensation Committee, except
that, without stockholder approval, the Plan may not be amended to: increase the
number of shares subject to issuance under the Plan: change the class of persons
eligible to participate under the Plan: withdraw the administration of the Plan
from the Compensation Committee, or, to permit any option to be exercised more
than ten years after the date it was granted. As of the date of the Form 10-KSB,
the Compensation Committee has yet to be formed, and no stock incentives have
been granted under the Incentive Plan.

                                       21
<PAGE>

EMPLOYMENT AGREEMENTS

         Pursuant to an employment agreement dated as of December 1, 1997, the
Company employed William Miller ("Miller") as its Chairman of the Board and
Chief Executive Officer over a term commencing on December 1, 1997 and expiring
on December 31, 2002. On February 7, 2000, the Company extended Mr. Miller's one
additional year to December 31, 2003 and agreed to sell to Mr. Miller 240,000
shares of Havana's Common Stock at the then fair market value of $.4044 per
share. The agreement provides for the following compensation: (i) a base annual
salary of $50,000 for 1998 (and each year thereafter) subject to increase to at
least $100,000 for the beginning of the following fiscal year and the remainder
of the term should the Company's gross revenues exceed $5,000,000 for the prior
year; (ii) a cash bonus pool for key management personnel administered by the
Board of Directors or a Compensation Committee under which a cash bonus will be
paid to Miller in an amount ranging from 0% to 50% of Miller's prior year's base
salary; (iii) five-year warrants to purchase 200,000 shares of the Company's
Common Stock at an exercise price of $6.00 per share, which warrants on May 14,
1998 automatically converted into 200,000 Class A Warrants identical to those
sold to the public in connection with its initial public offering; (iv) in the
event the Company engages in any interim financing in order to raise capital for
any venture, subsidiary acquisition or similar transaction, Miller shall have
the option to participate in, or match the terms of, any such interim financing
such that the terms offered to Miller are the same or similar to those terms
offered to such non-affiliated third party, and Miller is given the opportunity
to participate up to an amount equal to the amount of financing provided by any
third party and (v) ten-year options to purchase 200,000 shares of the Company's
Common Stock.

         As March 30, 2001, options to purchase 200,000 shares are vested and
are currently exercisable at $.4044. On February 4, 2000 Mr. Miller's options
which were originally exercisable at $6.00, subject to adjustment, were
cancelled and were re-granted on terms identical to those in his original
options except the exercise price was lowered to $.4044 per common share
representing the market value of the Company's common stock at February 4, 2000.
Reference is made to footnote 2 to Summary Compensation Table under "Executive
Summary" for a discussion of a modification to Mr. Miller's employment contract
which resulted in the issuance of 200,000 Class A Warrants in exchange for his
waiver of a total of $42,000 of monies due him. In fiscal year 2000 and 2001,
due to a lack of working capital, Mr. Miller's salary has been accrued at
$200,000 but not paid. See Item 12 - Note and Security Interest.

         Miller's employment agreement provides for indemnification to the full
extent permitted by law. Provided Miller beneficially owns less than 50% of the
Company's then outstanding voting stock, Miller is entitled to terminate the
agreement on 30 days' prior written notice upon the incurrence of one of the
following events: (a) the failure of the Company to re-elect him as Chief
Executive Officer; (b) a material change in his responsibilities, functions or
duties; (c) a material breach of the agreement by the Company; or (d) the
liquidation or dissolution, or consolidation, merger or other business
combination of the Company, or transfer of all or substantially all of the
Company' assets unless such consolidation, merger, or business combination does
not adversely affect Miller's position or the dignity or responsibilities of
Miller. The employment agreement can be terminated by the Company at any time
for cause (as defined in the agreement) on 30 days' prior written notice. In the
event that the agreement is terminated by the Company without cause or by Miller
(as described below) due to a material change in his responsibilities, functions
or duties, the Company shall pay Miller a lump sum on the date of termination as
severance pay an amount derived by multiplying the factor 2.99 by the sum of
Miller's salary and bonus paid in the year prior to the year of termination. In
the event the agreement expires and Miller is not re-hired as Chairman of the
Board and Chief Executive Officer of the Company on terms mutually acceptable to
the parties, the Company shall pay in a lump sum on the date of termination
severance compensation to Miller in an amount equal to Miller's salary and bonus
paid in the year ending December 31, 2002.

                                       22
<PAGE>

         In the event that (i) any person other than Miller, Jeanne E. Miller
(Miller's wife), Duncan Hill or their affiliates by any means of purchase or
acquisition becomes the beneficial owner of more than 50% of the Company's
outstanding Common Stock or (ii) the Company enters into an agreement of
reorganization, consolidation or merger of the Company with one or more
corporations as a result of which the Company is not the surviving corporation
or an agreement to sell all or substantially all of the assets of the Company,
then all of Miller's options to purchase Common Stock of the Company outstanding
at the time of the event and which were granted six months or more prior to the
event, shall immediately become exercisable in full. Thereafter, upon the
written election of Miller given within 180 days of the event, the Company shall
repurchase for cash all or any part of the options as specified in the written
election at a price per share equal to the difference in the fair market value
of the Company's Common Stock on the date of the event and the option exercise
price per share.

         Pursuant to an agreement dated as of December 8, 1998, the Company
entered into an employment contract effective February 1, 1999 with Gary J.
Corbett pursuant to which he agreed to serve as President of the Company at a
base salary of $80,000 per annum, bonuses to be determined by the Board of
Directors and a signing bonus of $22,000 should he not receive this amount via a
performance bonus from his prior employer. He was also granted options to
purchase 80,000 shares of the Company's Common Stock at an exercise price of
$3.50 per share with one-fourth of said options vesting on March 1, 1999 and
thereafter the balance of the options vesting in three equal annual installments
on the first three anniversary dates of the employment contract. The options
contain certain provisions to decrease the exercise price similar to those
provisions that apply to Mr. Miller's options, which are described above. The
term of the employment contract commenced on February 1, 1999 and will expire on
December 31, 2002. The contract may be terminated by Mr. Corbett on 120 days
prior written notice, by mutual consent of the parties, by the Company for cause
as defined in the contract and by the Company without cause on or before
December 31, 1999. If terminated without cause prior to December 31, 1999, Mr.
Corbett is entitled to four months termination pay. Termination without cause
after January 1, 2000 shall result in the Company being required to pay Mr.
Corbett termination pay equal to twelve months base salary. In April 2002 Mr.
Corbett was laid off due to a lack of working capital.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

         The Company's Certificate of Incorporation contains a provision
eliminating the personal monetary liability of directors to the extent allowed
under the General Corporation Law of the State of Delaware. Under the provision,
a stockholder is able to prosecute an action against a director for monetary
damages only if he can show a breach of the duty of loyalty, a failure to act in
good faith, intentional misconduct, a knowing violation of law, an improper
personal benefit or an illegal dividend or stock repurchase, as referred to in
the provision, and not "negligence" or "gross negligence" in satisfying his duty
of care. In addition, the provision applies only to claims against a director
arising out of his role as a director and not, if he is also an officer, his
role as an officer or in any other capacity or to his responsibilities under any
other law, such as the federal securities laws. In addition, the Company's
Bylaws provide that the Company will indemnify its directors, officers,
employees and other agents to the fullest extent permitted by Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act") may be permitted to directors, officers
and controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.

                                       23
<PAGE>

DIRECTORS COMPENSATION

         The Company pays its directors who are not also employees of the
Company $500 for each meeting attended and will reimburse such directors for
travel and other expenses incurred by them in connection with attending Board of
Directors meetings. Miller received options and other compensation pursuant to
his employment contract as discussed under "Employment Contract." In December
1997, the Company granted options to purchase 30,000 shares to each of Messrs.
Cobb and Stokkebye and subsequently cancelled such options and re-granted them
in February 2000 as described above. In February 2000, the Board of Directors
granted Clark D. Swisher options to purchase 30,000 shares of the Company's
Common Stock.

POTENTIAL CONFLICTS OF INTEREST

         Miller is a co-founder of the Company's parent, Duncan Hill. Miller is
currently the President of Duncan Hill, as well as Chairman of the Board of
Directors and Chief Executive Officer of Kids Stuff and the Company. Miller's
employment agreement with the Company provides that he shall be permitted to
devote such time to managing Duncan Hill and Kids Stuff, as he deems
appropriate. Accordingly, Miller will not be devoting his full-time attention to
managing the operations of the Company. Thus, conflicts of interest could
potentially develop (i) to the extent that Miller is not able to devote his
full-time and attention to a matter that would otherwise require the full-time
and attention of a business' chief executive officer, (ii) involving competition
for business opportunities, and (iii) involving transactions between the Company
and its affiliated companies. The Company has not adopted any procedure for
dealing with such conflicts of interest, except that the Company's Board of
Directors has adopted a policy that all new transactions between the Company and
Duncan Hill, Kids Stuff or any other affiliated company must be approved by at
least a majority of the Company's disinterested directors. Currently the Company
has no disinterested director and Duncan Hill and Miller control the election of
the directors including the disinterested directors.


Item 11. Security Ownership of Certain Beneficial Owners and Management.
-------- ---------------------------------------------------------------

         The following table sets forth as of April 30, 2002, certain
information with respect to the beneficial ownership of Common Stock and Series
A and Series B Preferred Stock by each person or entity known by the Company to
be the beneficial owner of 5% or more of such shares, each officer and director
of the Company, and all officers and directors of the Company as a group.

                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                          SHARES OF                       SHARES OF SERIES A AND B
                                                         COMMON STOCK                          PREFERRED STOCK
                                                      BENEFICIALLY OWNED                     BENEFICIALLY OWNED
                                                      ------------------                     ------------------

  NAME AND ADDRESS OF                           NUMBER           PERCENT (3)            NUMBER          PERCENT(4)
  BENEFICIAL OWNER (1)                          ------           ------- ---            ------          ----------
  --------------------
<S>                                               <C>                       <C>       <C>                          <C>
     Duncan Hill (2)                             866,000(4)                 29.8      6,100,000(4)                 100%

     William L. Miller (5)                     1,506,000(5)                 45.6      6,100,000(6)                 100%

     John W. Cobb (2)(6)                             30,000                  1.0               -0-                  -0-

     Clark D. Swisher  (2)(6)                        15,000                    *               -0-                  -0-

     Gary Corbett (7)                                75,000                  2.5               -0-                  -0-

     All five Officers and Directors
     and Duncan Hill as a Group                   1,626,000                 47.4      6,100,000(6)                 100%
</TABLE>

-----------------

       * Represents less than 1% of the outstanding shares of Common Stock.

         (1)      Beneficial ownership as reported in the table above has been
                  determined in accordance with Rule 13d-3 of the Securities
                  Exchange Act. or investment power, have been deemed
                  beneficially owned. Accordingly, except as noted, all of the
                  Company's securities over which the officers and directors and
                  nominees named, or as a group, directly or indirectly have, or
                  share voting.

         (2)      All addresses are c/o The Havana Group, Inc., 5701 Mayfair Rd,
                  North Canton, OH 44720.

         (3)      Calculated based upon 2,905,000 shares of Common Stock
                  outstanding without giving effect to the possible exercise of
                  outstanding Class A Warrants and Options.

         (4)      Calculated based upon 5,000,000 shares of Series A Preferred
                  Stock and 1,100,000 Series B Preferred Stock outstanding. The
                  holders of the Series A Preferred Stock are entitled to one
                  vote for each share held of record on all matters submitted to
                  a vote of the stockholders. The Series A Preferred Stock has
                  no conversion right. Each share of Series B Preferred Stock is
                  convertible at the option of the holder into one share of
                  Common Stock at any time after the Company has pre-tax
                  earnings of at least $500,000 in any calendar year.

         (5)      Mr. Miller may be deemed to beneficially own all Duncan Hill's
                  shares of capital stock based upon his and his wife's 68%
                  controlling interest in Duncan Hill's shares of Common Stock.
                  The table above reflects his controlling interest of 866,000
                  shares owned by Duncan and 240,000 shares of Havana's Common
                  Stock, Class A Warrants to purchase 200,000 shares of Common
                  Stock and options to purchase 200,000 shares of Common Stock,
                  which are directly beneficially owned by him. Mr. Miller by
                  virtue of his beneficial ownership of Common Stock and
                  Preferred Stock has the right to vote control the vote of
                  7,606,000 shares of the Company's voting capital representing
                  84.9% of the outstanding voting capital stock of the Company.

         (6)      Messrs. Cobb and Swisher beneficially own options to purchase
                  30,000 shares and 15,000 shares, respectively.

         (7)      Mr. Corbett beneficially owns options to purchase 70,000
                  shares of Common Stock.

                                       25
<PAGE>

Item 12. Certain Relationships and Related Transactions.
-------- -----------------------------------------------

         (i) Effective January 1, 1998, the Company entered into a one-year
agreement with Kids Stuff, Inc. whereby Kids Stuff provides administrative
functions to the Company at an annual cost of $206,100 based upon the following:
$34,000 for accounting and payroll services, $51,600 for administration and
human resource management, $34,900 for data processing, $32,200 for office
equipment and facilities use, $38,100 for merchandising and marketing services
and $15,300 for purchasing services. Kids Stuff is also providing fulfillment
services to the Company at a cost of $2.40 per order processed. The Company has
calculated these fees based on actual 1997 costs, and it is Management's belief
that these fees would represent actual costs should the Company undertake to
provide these services itself. The Company was also obligated to pay Kids Stuff
an amount equal to 5% of the Company's 1998 pre-tax profits, of which there was
none, as additional consideration for Kids Stuff providing the Company with
administrative and fulfillment services. At January 1, 1999 the agreement was
modified and extended on a month-to-month basis as the Company began to incur
direct costs for its administrative functions. The Company paid to Kids Stuff an
accounting, data processing, and administrative charge of $15,000 per year plus
$1.75 per shipment for warehouse services. The Company was also obliged to pay
5% of its 1999 pretax profits to Kids Stuff in connection with these services;
however, the Company had no pre-tax profits for 1999. Since March 2000, Havana
commenced performing these services itself, except that it pays $30,000 per year
to Kids Stuff for accounting, marketing, corporate and litigation services.

         Until August 1997, Duncan Hill received all revenues and deposited
these funds in its own account for the benefit of the Company and made payments
against Company charged expenses including, without limitation, any funds due
Duncan Hill and Kids Stuff.

         (ii) Pursuant to an employment agreement, the Company granted William
L. Miller five year Warrants to purchase 200,000 shares of the Company's Common
Stock in December 1997. Upon the completion of the Company's initial public
offering ("IPO"), the aforesaid Warrants which are exercisable at $6.00 per
share automatically converted into Class A Warrants identical to those sold in
the IPO.

         (iii) On December 8, 1997, the Company declared a stock dividend of
5,000,000 shares of its Series A Preferred Stock and five year warrants to
purchase 138,000 shares of the Company's Common Stock to Duncan Hill, the
Company's sole common stockholder prior to the Offering. Upon the completion of
the IPO in May 1998, the aforesaid warrants which are exercisable at $6.00 per
share automatically converted into Class A Warrants identical to those sold in
the IPO.

         (iv) On December 8, 1997, the Company sold 1,100,000 shares of its
Series B Preferred Stock to Duncan Hill in exchange for Duncan Hill's assumption
of $300,000 of indebtedness owing to an affiliate. The holder of each share of
Series B Preferred Stock will be entitled to receive, when, as and if declared
by the Board of Directors of the Company, out of funds legally available
therefore, cumulative quarterly cash dividends at the rate of $.025 per share,
quarterly on March 31, June 30, September 30 and December 31 commencing with
March 31, 1998. All issued and outstanding shares of Series B Preferred Stock
are owned by Duncan Hill. No Preferred Stock dividends have been paid as of
December 31, 2001.

         All the aforesaid transactions occurred at a time when the Company was
a sole shareholder of Duncan Hill. All future transactions between the Company,
Duncan Hill and Kids Stuff must be approved by a majority of the Company's
disinterested directors.

                                       26
<PAGE>

          (v) See Footnotes 5 to Summary Compensation Table under "Executive
Compensation" for a description of the issuance of 200,000 Class A Warrants to
Mr. Miller on June 30, 1999.

         (vi) On February 7, 2000, the Company sold 240,000 shares of its Common
Stock to Miller at a cash purchase price of $.4044 per share.

         (vii) In March 2000, the Company sold 245,000 shares of its Common
Stock to seven non-affiliated persons at a purchase price of $1.00 per share.

         (viii) In November 2001 the Company issued to William Miller, CEO, a
secured promissory note for partial payment of wages due in the amount of
$150,000. The promissory note is for a period of one year, bears interest at 6%,
and is secured by the assets of the Company. See Item 10.8.

         (ix) In September 2001 the Company entered into an agreement with
Equity Securities, Inc, for the performance of certain services. Equity
Securities Inc. was paid in the form of a warrant for 500,000 shares of the
Company's common stock at an exercise price of $0.10 per share. The warrant
expires in September 2006. See Exhibits, Item 4.4.

                                       27
<PAGE>

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

(a)      Exhibits
         --------

All Exhibits have been previously filed herewith in connection with Form SB-2
Registration Statement, file No. 333-45863 unless otherwise noted.

         2.0      Certificate of Merger (Ohio)
         2.1      Certificate of Merger (Delaware)
         2.2      Agreement and Plan of Merger
         3.0      Certificate of Incorporation
         3.1      Designation of Rights of Series A and Series B Preferred Stock
         3.2      By-Laws
         3.3      Form of Certificate of Amendment Correcting Designation of
                  Rights of Series A and Series B Preferred Stock
         4.0      Specimen of Common Stock
         4.1      Specimen of Class A Warrant
         4.2      Form of Underwriter's Unit Purchase Option
         4.3      Form of Warrant Agreement
         4.4      Equity Securities Inc. Warrant Agreement filed herewith.
         10.0     Employment Agreement with William L. Miller
         10.1     Agreement with Kids Stuff, Inc. as of January 1, 1998
         10.2     1997 Long-Term Incentive Plan
         10.3     Duncan Hill lease for principal office
         10.4     First Amendment to Exhibit 10.3 lease
         10.5     Kids Stuff credit facility with United National Bank
         10.6     Registrant's guarantee of Exhibit 10.5 (included in Exhibit
                  10.5)
         10.7     Employment Agreement dated as of December 8, 1998 with Gary
                  Corbett.**

--------------

**       Incorporated by reference from the Issuer's Form 10-KSB for its fiscal
         year ended December 31, 1999.

(b)      Reports on Form 8-K
         -------------------

         During the three months ended December 31, 2001, a Form 8-K was filed
regarding a change in accounting firms.

                                       28
<PAGE>

                                   SIGNATURES

              Pursuant to the requirements Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                    THE HAVANA GROUP, INC.


                                                    By: /s/ William L. Miller
                                                        -----------------------
                                                        William L. Miller,
                                                        Chief Executive Officer


Dated: Canton, Ohio
       May 20, 2001


              Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:


         Signatures          Titles                                 Date
         ----------          ------                                 ----

/s/ William L. Miller        Chairman of the
---------------------------  Board, Chief Executive Officer,
William L. Miller            Principal Financial Officer,
                             Treasurer and Secretary              May 20, 2002


/s/ John Cobb                Director                             May 20, 2002
---------------------------
John Cobb


/s/ Clark D. Swisher         Director                             May 20, 2002
---------------------------
Clark D. Swisher


                                       29