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, 2000
                                       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)
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                Delaware                                                                        34-1454529
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(State or other jurisdiction of                                                             (I.R.S. Employer
incorporation or organization                                                               Identification No.)
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                                  5701 Mayfair
                             N. Canton, Ohio 44720
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              (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 March 21, 2001 at 4:00 P.M., the aggregate market value of the voting
stock held by non-affiliates, approximately 1,650,000 shares of Common Stock,
$.001 par value, was approximately $363,000 based on the last sale price of
approximately $.22 for one share of Common Stock on such date. The number of
shares issued and outstanding of the Registrant's Common Stock, as of March 21,
2001 was 2,855,000, which increased to 2,905,000 on April 23, 2001.
<PAGE>
Item 1.           Description of Business

GENERAL

         The Havana Group, Inc. ("Havana" or the "Company") owns Phillips & King
International, Incorporated ("P&K") as a wholly-owned subsidiary which it
acquired on August 4, 2000. P&K, which has been in business since it was formed
in 1906 by Mr. Harry Phillips, is a wholesale distributor of tobacco, cigars,
pipes and related smoking products. P&K sells its products to approximately
3,000 retail shops. Havana is engaged in the business of (i) operating a retail
smokeshop in Canton, Ohio which primarily sells make your own cigarette kits,
pipes, cigars and smoking accessories; (ii) marketing make your own cigarette
kits, pipes, cigars, tobaccos and related accessories directly to consumers
through its full color catalog (the "Carey Smokeshop Catalog"); and (iii)
providing a program of automatic periodic shipments of pipe tobacco directly to
consumers (the "Carey Tobacco Club"). The Company has developed a website under
the name "Smokecheap.com" and markets certain of its products through this
website.

         The Company owns a second 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
three people and has the production capacity of 20,000 smoking pipes per year.
The wood used to produce the smoking pipes (i.e. briarwood) is purchased on a
semi-finished basis and Monarch completes the assembly and finishes the final
product. Products produced by Monarch are marketed as middle market pipes, with
retail prices ranging from approximately $20 to $40 and with factory costs of
$8.00 to $12.00 per unit.

         The Company's 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, the Company issued 1,000,000 shares of
Common Stock to Duncan Hill, Inc. ("Duncan Hill") and assumed all liabilities of
Carey. The 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 the 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.


                                        2
<PAGE>
RECENT DEVELOPMENT

         On August 4, 2000, Havana 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. Contemporaneous with the acquisition of
P&K, Havana entered into 90-day transitional consulting contracts with John S.
Parker and Jerold E. Christensen and agreements not to compete for a period of
two years.

         This transaction was accounted for under the purchase method of
accounting. See Note 8 contained in notes to consolidated financials included
elsewhere herein.

         P&K is a wholesale distributor of tobacco, cigars, pipes and related
smoking products. The method of sale is by direct contact, and P&K employs
fourteen field sales representatives in that regard as of March15, 2001. P&K's
sales reached a peak of $26.7 million in 1997, reflecting the popularity of
premium cigars. Following the decline in consumption of premium cigars, P&K's
sales dropped 33% in 1998, 22% in 1999 and 20% in 2000. Sales in 1999 were also
adversely affected by P&K's Chapter 11 Bankruptcy, filed on a voluntary basis on
February 8, 1999.

         During the 1997-1998 peak in premium cigars, Cuba Libre Humidors, Inc.
("Cuba Libre") claimed to have received a verbal purchase order for
humidification devices for continuous monthly sale to P&K. This did not happen,
Cuba Libre filed a lawsuit and was awarded a judgment of $1.8 million. P&K
responded by filing for protection under Chapter 11 of the Bankruptcy Code and
began defensive actions. This action was settled on August 4, 2000 and as part
of the Plan of Reorganization, P&K paid $300,000 in cash and issued notes in
favor of Cuba Libre including: (a) an unsecured note for $400,000 in the
principal amount with interest at 7% per annum and payable in quarterly
installments with the balance due on or before May 1, 2005; and (b) an unsecured
Note in the amount of $125,000 in principal amount without interest for the
first two years and to bear interest at 7% beginning on the third year to be
paid in quarterly installments with the balance due on or before May 1, 2005.

         Until its Chapter 11 filing, P&K operated as a subchapter S corporation
under the United States Tax Code of 1986, as amended. Prior to Havana's
acquisition of P&K, P&K received a Confirmation Order confirming a Plan of
Reorganization which has become a final Order.

INDUSTRY TRENDS AND DEVELOPMENTS

         The market for non-cigarette smoking products is often characterized as
the market for premium cigars. Premium cigars are the largest segment of sales
for traditional smokeshops, and the trends for true premium handmade cigars,
measured by importation of premium cigars by the Cigar Association of America,
have declined approximately 22% in 2000 as compared to 1999. While this decline
in the number of units imported into the United States likely indicates that
retail tobacconists are still clearing old inventories, the number of units
imported in 2000 was 1.5 times greater than 1995. On the other hand, The Cigar
Association of America reported that wholesale sales and imports of all large
cigars, including popular-priced domestic products, increased by 1-2% during
2000 as compared to 1999. However, there can be no assurance that the market for
premium cigars will not continue the declining trends of the past few years.

                                        3
<PAGE>
Consolidations and Mergers

         In May 2000, Swedish Match A.B, completed its transactions with General
Cigar Holdings Inc. whereby that company acquired 64% of the outstanding shares
of General Cigar, with the Cullman Family retaining 36% interest. General Cigar
produces and distributes the number one premium cigar sold in the U.S.A.,
Macanudo, as well as other leading premium brands, including Partagas, Punch,
Hoyo de Monterrey and Cohiba. In October 2000, Altadis S.A. the world's largest
cigar company, completed the acquisition of 50% of Corporation Habanos S.A., a
company which controls more than three quarters of the world market for premium
cigars, not including the U.S. market, for U.S. $477 million. Brands controlled
by Habanos include such famous Cuban names as H. Upmann, Romeo Y Julieta and
Montecristo.

         The Company believes that the large consolidations in the premium cigar
business will be accompanied by a proportionate amount of cost-cutting, and that
sales forces will be consolidated, producing an opportunity for growth in the
distribution business to smokeshops. The Company intends to position itself to
take advantage of this trend.

Methods of Distribution

Retail Smokeshops

         In December 2000, Smokeshop Magazine issued their 1999 annual survey of
retail smokeshops. The magazine reported that the average smokeshop had $500,000
in retail sales for the year 1999, and the approximate sales by category were as
follows: Premium Cigars 38%; Smoking Pipes and Tobaccos 8.9%; Smoking Related
Accessories 7.5%; Imported Cigarettes 4.7%, Other Products 40.9%. Smokeshop
further reported that 90% of all smokeshops were owner-operator managed, while
5% were classified as chains and 5% as franchise operations. The Company, from
its industry sources, estimates that there are approximately 3,000 retail
smokeshops in the United States.

Tobacco Outlet Stores

         The Company has identified Tobacco Outlet Stores ("TOS") as a potential
sales outlet for certain of its products. Tobacco Outlet Stores are typically
800 square feet and specialize in selling branded cigarettes at discounts,
frequently at state minimums. While published data regarding the stores is
limited, the Company believes that over 10,000 such stores were in operation at
December 31, 2000.

         The Company has had discussions with TOS operators who desire to add
other smoking related products which have higher gross profit margins than
branded cigarettes. The Company believes that their branded smoking pipes, pipe
tobaccos, and make-your-own cigarettes are potential TOS product additions
through Phillips & King International.


                                        4
<PAGE>
Direct To Consumers

         The non-cigarette tobacco business has a limited number of companies
that offer their products direct to consumers. The Company believes that the
largest of these is 800 JR Cigar, which sells cigarettes at retail, along with
other tobacco and related products at retail and by mail order. Other companies
include Thompson Cigar Company and Finck Cigar Company.

         The Company has historically offered its products to consumers only
through its Carey's Smokeshop Catalog, exclusively by mail order. The Company
believes that Carey's Smokeshop catalog provides a good initial revenue base,
and that the catalog can be used for both retail and wholesale sales. The
Company believes that it can maintain its customer base of direct sales to
consumers, but significant expansion of the customer base by direct advertising
to consumers is expensive and inefficient. In 1999 the Company established the
Carey "Tobacco Lover's Club" which offers discounted prices to consumers in
return for an annual membership fee, currently $20 per year. The intent of the
Company is to establish both wholesale and retail prices in its catalog, so that
the catalog can be mailed to both retailers and consumers.

Internet e-commerce Sites

         The Company believes that numerous Internet sites have been offering
premium cigars and other smoking related products. The Company has no data
regarding the number of such sites or the amount of sales generated by this
medium. Management believes that an Internet e-commerce site can be highly
effective when used in conjunction with other methods of distribution namely,
business-to-business wholesale distribution.

         During 1999, the Company has undertaken the development of two Internet
web sites, www.havanagroup.com and www.smokecheap.com. The Company's
www.smokecheap.com became operational in September 1999 as a part of Yahoo!
Shopping. The Company's other Internet site, www.havanagroup.com has not been
completed. The Company estimates that www.havanagroup.com is approximately 60%
complete, and can be modified to accommodate both wholesale and retail business.
The Company had invested over $110,000 in Internet web site development.

         The Company believes that it can continue to develop its business in
e-commerce, and convert its Internet site developments to both wholesale and
retail activity. The Company desires to use the wholesale business-to-business
activity ("B2B") to serve both smokeshops and suppliers, so that the movement of
product from the manufacturing level to the consumer would be conducted in the
most efficient manner.

                                        5
<PAGE>
STRATEGIES

         The Company has been in the business of manufacturing and developing a
balanced line of non-cigarette smoking products for over 20 years. The Company
has sold these products through its "Carey Smokeshop Catalog" directly to
consumers who use smoking pipes, tobaccos, cigars, accessories and products to
custom-make cigarettes. The Company believes that it can capitalize on its
experience and grow its business and wholesale distribution by use of the
following strategies:

o Expand its business in wholesale distribution by acquisition and proprietary
  brand development.

o Expand its brand ownership through product development and acquisition.

o Convert its Internet site to accommodate both retail and business-to-business
  activity

o Develop wholesale supplier relationships, which are Internet based.

o Maintain Carey's Smokeshop Catalog, by converting it for us in both retail and
  wholesale sales environments.

o Discontinue or sell the Company's "Havana Group Smokeshop" retail store.

o Continue to develop its brand of make-your-own cigarettes, Zigarettes, for
  sale through catalogs, retail smokeshops, and Tobacco Outlet Stores.

     The Company currently owns certain brands namely, E.A.Carey "Magic Inch"
smoking pipes, Duncan Hill "AEROSPHERE" smoking pipes, "Carey's Private Reserve
Blends" of smoking tobaccos, and "Carey's Handmade Honduran Cigars", which the
Company historically offered only by mail order for exclusivity and to provide
the "not available in stores" claim. The Company believes that it has
established brand equity in these product areas, and that it can leverage this
brand equity through wholesale distribution.

     The Company also believes that it can expand its wholesale business by
adding suppliers that have been affected by recent consolidations and mergers.
The Company believes that certain non-cigar products and suppliers displaced by
consolidations are in search of distribution channels to smokeshops.

Expand its brand ownership through product development and acquisition.

         During the third and fourth quarters of 1999 the Company began brand
development of a proprietary line of Make-Your-Own cigarettes ("MYO"). The
Company has applied for a federal trademark for Zigarettes, has received a
federal license for the possible future importation of tobaccos, and introduced
the brand to the retail trade through Phillips & King during the third quarter
of 2000. The Company had invested over $50,000 in the development of this brand
and its related products.


                                        6


<PAGE>
         The Company has plans in the future to convert its Internet site to
accommodate both retail and business-to-business activity. The intent would be
to provide PCs that are Internet based to customer (smokeshop) sites for their
use in placing orders with the Company.

         During 1999, the Company has undertaken the development of two Internet
web sites, www.havanagroup.com and www.smokecheap.com. The Company's
www.smokecheap.com became operational in September 1999 as a part of Yahoo!
Shopping. The Company's other Internet site, www.havanagroup.com has not been
completed. The Company estimates that www.havanagroup.com is approximately 60%
complete, and will be modified to accommodate both wholesale and retail business
during 2001.

Develop wholesale supplier relationships that are Internet based.

         The Company believes that an Internet based distribution system must
also link suppliers to the Company to be of maximum effectiveness. If adopted,
the Company's goal would be to link any supplier to the Company from any
location in the world, so that the supplier can be informed of inventory levels
and sales of his products at any time on a real-time basis. However, there can
be no assurance that this will occur due to a number of factors including, but
not limited to, the Company's development of the wholesale business of Phillips
& King International, Inc.

Maintain Carey's Smokeshop Catalog by converting the catalog to be used for both
retail and wholesale sales.

         The Company believes that Carey's Smokeshop catalog provides a good
initial revenue base, and that the catalog can be used for both retail and
wholesale sales. The Company believes that it can maintain its customer base of
direct sales to consumers. In 1999 the Company established the Carey "Tobacco
Lover's Club" (TLC) which offers discounted prices to consumers in return for an
annual membership fee, currently $20 per year. As of December 31, 2000, the
Company had 4,374 TLC members. Licensed retailers are granted TLC prices while
the annual membership fee is waived.

The Company's "Havana Group Smokeshop" retail store.

         Company had operated a smokeshop named "Carey's Smokeshop" from 1984 to
1996 to maintain a retail presence, which can provide the Company with a factory
outlet for its overstock products, which have not been sold through the Carey
Smokeshop Catalog or the Carey Tobacco Club. In October 1996, the Company closed
its retail store, leased an off-mall retail location in Canton Ohio, and
reopened as "The Havana Group" ("hereinafter referred to as the "Smokeshop") on
December 8,1997. The Smokeshop sells make your own cigarette kits, pipes,
cigars, smoking accessories, and fine wines. The Company believes that its
experience in the retail smokeshop business has provided valuable experience to
enable the Company to be a provider of products and services to other smokeshops
on a wholesale basis. At present the Company believes that owning retail store
is not consistent with its current strategies, and intends to explore the
possibility of sale of its retail store.

                                        7
<PAGE>
         In July 1999 the Company introduced Make-Your-Own cigarettes in its
Carey's Smokeshop Catalog. In 2000, the Company offered five types of cigarette
machines, paper tubes with and without filters, and ten varieties of cigarette
tobacco. The Company devoted approximately 10% of its catalog space to
Make-Your-Own cigarettes, and engaged in a direct sell advertising campaign in
the third and fourth quarters of 1999, as well as during the year 2000. The
products were sold under a variety of supplier brand names. Based upon its
success in its 1999 and 2000 efforts, it is the Company's intent to continue to
develop its own line of Make-Your-Own cigarettes for sale through catalogs,
smokeshops, and Tobacco Outlet stores.

MERCHANDISING AND PRODUCT DEVELOPMENT

HAVANA GROUP DIRECT

         The Company designs all of its Carey "Magic Inch" and Duncan Hill
"Aerosphere" smoking pipes and produces them at its Monarch Pipe facility in
Oklahoma. The current Carey catalog contains 18 design groups marketed as
various series, such as "Aerosphere Grand Deluxe series or "Carey Classic
Series." Additionally, the Company offers other hand made imported smoking pipes
in its catalog, generally at retail prices from $19.95 to $99.95 each. The
Company sources these products from international suppliers and from domestic
distributors of imported pipes.

         The Company merchandises 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. Because of the composition of the catalog's customer base,
cigar sales are generally mid-range in the cigar market, with the most popular
cigar the Carey Honduran bundle, which retails from $1.15 to $1.60 per cigar.
Because of the upscale target market of the retail store, cigar sales range from
$2.50 to $7.50 per cigar, with an average price of $5.00 per cigar.

         The Company continued to expand its line of Make-Your-Own cigarettes
products in its Carey's Smokeshop Catalog. The Company offered five types of
cigarette machines, paper tubes with and without filters, and 19 brands of
cigarette tobacco, including 10 Carey blends. The Company devoted approximately
10% of its catalog space to Make-Your-Own cigarettes, and engaged in direct sell
advertising in the third and fourth quarters of 1999 and the year 2000. 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. The merchandising
efforts in this area included supply of existing products, and provided for the
future supply of products on a private label basis.

PHILLIPS & KING INTERNATIONAL

         P&K offers approximately 3700 stock-keeping units (SKU's) of product in
categories ranging from premium, imported cigars and cigarettes, domestic
cigars, pipes and pipe tobaccos, products to make cigarettes, smokers'
accessories and gift items. Sales by product category for 2000 were: cigarettes
40%, cigars 37%, tobacco 14%, other products 9%.


                                        8


<PAGE>
MARKETING

HAVANA GROUP DIRECT

         Currently, the Company markets its products directly to consumers
through its "Carey's Smokeshop" catalog, and through its "Carey Tobacco Club."
For the year ended December 31, 2000, Carey mailed 415,223 catalogs, which
generated average gross revenues of $3.23 per catalog mailed. The catalog
consists of 56 full color pages, with approximately 65% offering pipes,
tobaccos, and related accessories, approximately 25% offering cigars and cigar
related accessories and 10% offering make-Your-Own cigarettes.

         Carey Traditional Tobacco Club, in operation since 1975, is a program
of automatic periodic shipments of tobacco directly to consumers. Members are
solicited in the catalog, and in return for their membership agreement they are
offered products at a discounted price. The member selects the blend, the
quantity of tobacco per shipment and the frequency of the shipments. Billing is
by credit card or a Carey open account. Carey Tobacco Club relies upon brand
loyalty, and the Company estimates that 80% of the Club members have been
members in excess of five years. At December 31, 2000, Carey's Traditional
Tobacco Club had 555 active members and 4,374 tobacco Lovers Club members, many
of who participate in the Company's "Tobacco Express" automatic shipping
program. Traditional Club and T.L.C. members generated $338,747 in gross sales
in 2000 for the Company.

         During the third and fourth quarters of 1999 the Company began
marketing Make-Your-Own Cigarettes, using a variety of supplier brand names. The
Company's marketing strategy was to devote approximately 9% of its catalog to
this product area, and test direct sales to consumers through Weekly World News,
The National Enquirer, USA Today, and various Sunday newspapers. During 2000,
this product category generated approximately 35% of the Company's gross sales.

         The Company has operated a retail outlet, "Carey's Smokeshop," since
1984. In October 1996, the Company closed the outlet, redesigned the planning
and marketing strategies, and reopened the Smokeshop in Canton, Ohio, as The
"Havana Group" during December 1997. The retail outlet offers product groups
proven historically in the smokeshop industry, and has added other product
lines, such as make your own cigarette kits and fine wines. The Company
considers that the "Havana Group" retail store has served the Company well in
providing the Company with valuable retail experience. The Company intends to
sell or license the business to others.

PHILLIPS & KING INTERNATIONAL

         P&K markets its products through a 200-page full color wholesale
catalog, fourteen field sales representatives and an in-house customer service
staff. P&K plans to add an out-bound telemarketer to its customer service staff
during 2001. P&K is a major exhibitor at the Retail Tobacco Dealers Of America,
Inc.'s annual tradeshow, the industry's largest tradeshow for premium cigars and
tobacco products and also exhibits selected products at the International
Tobacco Expo, an annual tradeshow specifically targeted toward the growing
Tobacco Outlet Store (T.O.S.) market. P&K markets its exclusive brand of
popularly priced cigars, Churchill Rejects, which has become very popular in the
T.O.S. market.


                                        9

<PAGE>
CUSTOMER SERVICE AND TELEMARKETING

HAVANA GROUP DIRECT

         During 2000, the Company derived approximately 72% of its non-club
revenue through orders placed over the telephone, emphasizing superior customer
service. The Company's payment terms have been major credit cards, checks or
open account. The Company's 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. If a shipping error has
occurred the Company will issue call tags to pick up merchandise shipped in
error and will send a corrected shipment. The Company's return rate is
approximately 4% of sales.

PHILLIPS & KING INTERNATIONAL

         P&K receives the majority of its non-tradeshow orders by telephone or
fax, either from its field sales representatives or direct from its customers.
The company emphasizes superior customer services and has one of the most
customer-friendly returns policies in the wholesale trade.

FULFILLMENT AND DELIVERY

HAVANA GROUP DIRECT

         The Company's fulfillment and delivery objective is to provide
excellent customer service within a low cost structure. Prior to March 2000, the
Company purchased its fulfillment operations from its affiliate, Kids Stuff Inc.
a company controlled by Duncan Hill. Kids Stuff's facility consists of 39,000
square feet of owned facilities in North Canton, Ohio. 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.

         In November 1999 the Company 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. The Company will pay $96,000 per annum
for this facility, less any sub-lease income that the Company may realize from
unused office space. The Company moved into this facility in March 2000. At that
time the Company assumed direct responsibility for its fulfillment and delivery
functions, and incurring direct costs for these functions. During 2000, the
Company processed 59,056 shipments.

PHILLIPS & KING INTERNATIONAL

         P&K  leases  its office  (2000 sq.  ft.) and warehouse (16,800 sq. ft.)
facility,  located in City Of Industry, CA., under a lease agreement expiring on
July 31,  2001,  and  providing  for lease  payments of $11,615  per month.  The
facility is designed to process  incoming  shipments on a  palletized,  boxed or
containerized  basis and forwards  most  outbound  shipments  via United  Parcel
Service.  During the last quarter of 2000, P&K shipped an average of 1800 orders
per month with an average wholesale value of $500.00 per order.

                                       10
<PAGE>
INVENTORY/PURCHASING

HAVANA GROUP DIRECT

         The Company conducts its purchasing operations at its general offices
in Canton, Ohio. Each catalog contains approximately 550 products or
stock-keeping units (SKU's) and the website SmokeCheap.com, features 421
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 the
Company's inventory.

PHILLIPS & KING INTERNATIONAL

         P&K conducts its purchasing operations at its offices in City Of
Industry, CA. Approximately 3,700 SKU's are offered for sale through the
wholesale trade. 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 the
Company's inventory.

PRODUCT SOURCING

HAVANA GROUP DIRECT

         The Company acquires products for resale in its catalogs from numerous
domestic and international vendors. All "Carey" and "Duncan Hill" pipes are
manufactured by the Company's wholly-owned subsidiary, Monarch. Monarch supplies
approximately 11% of the Company's catalog products. Other than Monarch and
Phillips & King International, Inc., the Company currently has two vendors that
supply more than 10% of its catalog products. These companies include: Peter
Stokkebye International, Inc. (28%) and CTC Industries, Inc. (12%). Any
disruption of service from any of these companies may have an adverse effect on
the Company's future sales. Although these suppliers provide a substantial
portion of the Company's catalog product, the Company believes that, with the
exception of products made by Monarch, most products can be sourced from
alternative suppliers. The Company acquires products for sale in the retail
store from numerous domestic vendors.


                                       11
<PAGE>
PHILLIPS & KING INTERNATIONAL

         P&K acquires its product for sale through wholesale  distribution  from
numerous   domestic  and  international   vendors,   either  directly  from  the
manufacturers or domestic  vendors.  The Company  currently has six vendors that
supply more than 10% of its products.  These  companies  include:  Villazon Co.,
Lane Limited,  General Cigar Co.,  Inter-Continental Cigar Co., Nat Sherman Inc.
and  Consolidated  Cigar  Corp.  Any  disruption  of  service  from any of these
companies  may have an adverse  effect on the Company's  future sales.  Although
these suppliers provide a substantial  portion of the Company's catalog product,
the Company believes that many products can be sourced from alternate suppliers.

SEASONALITY

HAVANA GROUP DIRECT

         The Company's 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.

PHILLIPS & KING INTERNATIONAL

         P&K's wholesale business is somewhat seasonal as many customers book
their orders for the holiday season during the Retail Tobacco Dealers of
America's annual tradeshow, which is traditionally held during August of each
year.

DATA PROCESSING

HAVANA GROUP DIRECT

         At the present time the Company relies upon Kids Stuff for data
processing services to process its orders and shipments. Additionally, the
Company has invested approximately $52,000 in data processing equipment to link
to the Kids Stuff system to provide e-mail, networking, and high-speed Internet
access. The Company is allocated its portion of data processing costs.


PHILLIPS & KING INTERNATIONAL

         P&K's current data processing system is a PC server driven system with
an accounting package that has adapted to the distribution business.

AGREEMENT WITH KIDS STUFF

HAVANA GROUP DIRECT

         Effective January 1, 1998, the Company 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 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 were none, as
additional consideration for Kids Stuff providing the Company with
administrative and fulfillment services. At January 1, 1999 the agreement was

                                       12
<PAGE>
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 is also obligated 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. This agreement is still in
effect, but as of this printing the Company has started providing some of these
services themselves. Since March 2000, the Company provides its own fulfillment
services from its leased facility located in North Canton, OH and pays Kids
Stuff a $2,500 per month administration allocation for such services as
accounting, payroll, data processing and human resources provided to the Company
by Kids Stuff, Inc.

COMPETITION

 HAVANA GROUP DIRECT

         The Company has identified four companies that are involved in mail
order as a primary method of sales and distribution, and believes that this
constitutes the Company's primary current mail order competition. The four
identified competitors, which include 800 JR Cigar, Thompson's Cigar, Fred
Stoker & Sons, Inc., and Finck Cigar Co. are all mail order cigar businesses
that are substantially larger than the Smokeshop. Management believes that the
largest competitor in the mail order cigar business is 800-JR Cigar. Competition
in all aspects of the Company's business is intense. No assurances can be given
that the Company will be able to successfully compete in all aspects of its
business in the future.

PHILLIPS & KING INTERNATIONAL

         P&K has identified five companies that are involved in wholesale
distribution of cigars and other tobacco products, and believes that this
constitutes its primary current wholesale competition. The five identified
competitors, which include Kretek International, G.A. Andron & Company, Quintin
USA, Crossline Distributing and Arango Cigar Company are all wholesale
distributors of cigars and/or cigarettes and other tobacco products that may be
substantially or somewhat larger than P&K. Competition in all aspects of the
P&K's business is intense. No assurances can be given that P&K will be able to
successfully compete in all aspects of its business in the future.

REGULATORY MATTERS

HAVANA GROUP DIRECT

         The Company's 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 wine is regulated in Ohio by the
Ohio Department of Liquor Control, which requires the Company to be licensed in
order to sell such products. The Federal Trade Commission regulates the
Company's 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. The Company has no claims or regulatory matters in
process or pending as of March 8, 2001.


                                       13
<PAGE>
PHILLIPS & KING INTERNATIONAL

         P&K's business, as well as the wholesale tobacco distribution industry,
is also subject to regulation by a variety of state and federal laws relating
to, among other things, advertising and sales taxes. As P&K is currently
licensed to affix tax stamps to cigarettes to be sold in 35 states and to
collect tobacco taxes on behalf of the states, it is subject to certain
regulations of these states, in addition to California.

         The tobacco industry is subject to regulation in the United States at
the federal, state and local levels, and the recent trend is toward increasing
regulation. Although hearings have been held on certain of these proposals, to
date, none of such proposals have been passed by Congress.

         Beyond Congressional action, federal regulators have also been
examining whether the cigar industry merits tougher rules, as well. In early
1998, the Federal Trade Commission ordered cigar manufacturers to report how
they market cigars, how much they spend on advertising, and who is buying their
products. The Federal Trade Commission has issued regulations that require
manufacturers to affix warning statements to cigar packaging effective February
13, 2001.



                                       14
<PAGE>
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.

         While the Master Settlement Agreement (MSA) was not been codified by
federal law, 46 states have adopted, "model laws" which were defined in the
agreement with the states. These model laws provide, in part, for bans on
outdoor billboard and transit advertising of tobacco products, significant
document disclosure by the settling tobacco companies, bans on sports
advertising and product logos on non-tobacco products.

         Under the model laws adopted by most states, tobacco manufacturers
which are not signatories to the MSA are required to place funds equivalent to
their respective market share assessments of the total settlement payments into
escrow funds on a state-by-state basis over a period of 25 years. Roll-your-own
(RYO) cigarette tobaccos are considered to be the equivalent of cigarettes under
the model laws and manufacturers may be compelled to either sign the MSA or make
equivalent escrow payments into state funds.

         Sales of these tobaccos and accessories used by consumers to make their
own cigarettes have become an important source of revenues for the Company since
June 1999. While the Company is not a manufacturer of RYO tobaccos, there is no
guarantee that it will not become liable, directly or indirectly, for settlement
payments in the states where the Company may have nexus (property or personnel
located within the states). There can be no assurances that the Company will not
be drawn into future litigation by individuals or classes regarding claims of
injury allegedly resulting from tobacco use or exposure to tobacco smoke.

         The potential costs to the Company of defending prolonged litigation
and any settlement or successful prosecution of any health-related litigation
could have a material adverse effect on the Company's business, results of
operations and financial condition. The recent increase in the sales of RYO
tobaccos, as well as the continued popularity of cigar smoking, and the
publicity of such increases may increase the probability of legal claims.

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.

                                       15
<PAGE>
EMPLOYEES

 HAVANA GROUP DIRECT

         As of January 1, 2001, the Company has four full-time salaried
management employees, four salaried non-management employees, five hourly
full-time employees, and four hourly part-time employees; this includes its
retail store and Monarch pipe manufacturing facility.

PHILLIPS & KING INTERNATIONAL

         As of January 1, 2001, Phillips & King had four full-time salaried
management employees, three salaried non-management (sales) employees, two
salaried part-time employees, sixteen hourly full-time employees and one
part-time employee.

Item 2.           Properties.

HAVANA GROUP DIRECT

         In November 1999 the Company 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. The Company pays $8,000 per month for
this facility, less any sub-lease income that the Company may realize from
unused office space. The Company moved into this facility in March 2000.

         The facility is located approximately three miles from the Kids Stuff
facility, and this proximity will enable the Company to connect to Kids Stuff by
high-speed telephone line connections. The Company anticipates that it will be
able to utilize the computer systems, telephone system hardware, and Internet
connections at Kids Stuff.

         The Company maintains its corporate address with its parent and Kids
Stuff for certain accounting and administration functions.

PHILLIPS & KING INTERNATIONAL

         Phillips and King leases its office (2000 sq. ft.) and warehouse
(16,800 sq. ft.) facility under a lease agreement expiring on July 31, 2001, and
providing for lease  payments of $11,615 per month.  No assurances  can be given
that P&K will be able to  extend  the lease on terms  satisfactory  to it before
P&K's lease expires.

Item 3.           Legal Proceedings

         In the normal course of business, the Company and P&K may be involved
in various legal proceedings from time to time. Presently, however, the Company
and P&K are not a party to any material litigation, whether routine or
incidental to its business, or otherwise.

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

                  Not applicable.

                                       16
<PAGE>
                                     PART II

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

         In May 1998, the Company 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 March 21, 2001 at 4:00 P.M. Eastern Standard Time,
the last sale price of the Common Stock in the over-the-counter market was
approximately $.22. The following table reflects the high and low sales prices
(rounded to the nearest penny) for the Company's Common Stock and Class A
Warrants for the periods indicated as reported by the NASD.
<TABLE>
<CAPTION>

                                  Common Stock

         Fiscal Year Ended December 31, 2000                                             HIGH                    LOW
         -----------------------------------                                             ----                    ---
<S>                                                                                     <C>                     <C>
             First Quarter                                                              $2.00                   $.19
             Second Quarter                                                              1.31                    .28
             Third Quarter                                                                .50                    .25
             Fourth Quarter                                                              1.31                    .19

         Fiscal Year Ended December 31, 1999                                            HIGH                     LOW
         -----------------------------------                                            ----                     ---
             First Quarter                                                             $5.25                   $1.50
             Second Quarter                                                             5.50                    1.63
             Third Quarter                                                              4.00                    2.00
             Fourth Quarter                                                             3.75                     .19


                                       17
<PAGE>
                                Class A Warrants

        Fiscal Year Ended December 31, 2000                                              HIGH                    LOW
        -----------------------------------                                              ----                    ---
            First Quarter                                                               $1.00                   $.01
            Second Quarter                                                                .38                    .03
            Third Quarter                                                                 .13                    .06
            Fourth Quarter                                                                .22                    .02


         Fiscal Year Ended December 31, 1999                                             HIGH                    LOW
         -----------------------------------                                             ----                    ---
             First Quarter                                                              $1.88                  $ .08
             Second Quarter                                                              1.75                   1.00
             Third Quarter                                                               1.13                    .30
             Fourth Quarter                                                               .81                    .03

</TABLE>
         The quotations in the tables above reflect inter-dealer prices without
retail markups, markdowns or commissions.

          The Company had approximately 17 record holders of its Common Stock
and six record holders of its Class A Warrants as of March 21, 2001 as reported
by its transfer agent and warrant agent (i.e. American Stock Transfer & Trust
Company). The foregoing does not include beneficial holders of the Company's
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.



                                       18
<PAGE>
RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999.


     Total net sales for the year ended December 31, 2000 were 6,007,895 an
increase of 287% from 1999 sales of $1,551,623. The increase in sales reflects
the Company's purchase of Phillips & King International, Inc. which contributed
$4,221,921 during the year 2000, or 70.3% of total net sales for the year 2000.
Net sales include sales from merchandise, shipping and handling charges and
mailing list rental. Included in total net sales is the retail store revenue,
which decreased to $64,838 in 2000, compared with $115,484 in 1999.

     Total cost of sales increased 342% from 1999 reflecting the overall
increased sales of the Company. Merchandise costs increased from 43.0% of net
sales in 1999 to 47.2% in 2000. The Company attributes this increase to
generally higher merchandise cost percentages at P&K, which sells its
merchandise in wholesale distribution.

     Selling expenses, as a percentage of net sales, decreased from 29.9% for
1999 to 18.4% for 2000. Company attributes this reduction to the selling expense
at P&K, which sells its merchandise in wholesale distribution and spends
relatively less on selling expense as a percentage of sales.

     General and administrative expenses during 2000 were 1,464,160, or 24.3% of
net sales, compared with $412,931, or 26.6% of net sales, for the year ended
December 31, 1999. The decrease is attributable to the generally higher sales
levels which, in turn, reduce the percentage levels of overhead expense. The
higher total expense for General & Administrative expense reflects the addition
of P&K.

     Administrative expenses are partially provided to the Company by Kids Stuff
Inc., which provides administrative functions to the Company at an annual cost
of $30,000.

     Net loss for the year ended December 31, 2000 was $1,139,013 compared with
a net loss of $288,448 for the year 1999. The Company's loss was due primarily
to increased levels of expense in General and Administrative expenses, which
increased as a direct result of the acquisition of P&K.

LIQUIDITY AND CAPITAL RESOURCES

                  At December 31, 2000, the Company 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 the Company's cash position was increased by changes in
working capital, which affected operating activities. The operating activities
consumed $336,731 in cash through increases in inventories, deferred catalog and
deposits, and other assets, but provided $201,234 from an increase in accounts
payable and $190,198 through decreases in accounts receivable and prepaid

                                       19
<PAGE>
expenses. 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. During 2000, net cash of $947,115 was
used in investing activities to purchase P&K and $64,355 was used to purchase
property and equipment partially offset by $379,555 of cash acquired in the
purchase of P&K. Financing activities during 2000 provided cash of $631,403.
During 2000, net cash of $631,403 was provided by financing activities which is
a result of the sale of $342,055 of common stock and $896,212 in borrowings on a
line of credit partially offset by payments on long term debt of $577,709 and a
change in due to/from affiliates of $29,155. The Company's ending cash balance
decreased to $193,898 at December 31, 2000.

         The Company has no overall credit facility at the current time, but
finances the majority of its business through the P&K credit facility obtained
in October 2000. The facility is provided by the Wells Fargo Bank, and consists
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 December 31, 1999, the Company had a deficit in retained earnings of
$4,294,707, compared to a deficit in retained earnings of $4,006,259 at December
31, 1998. This resulted from an operating loss of $288,448 for the year ended
December 31, 1999. For the year ended December 31, 1999, 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
consumed $270,493 in cash through increases in accounts receivable, inventories,
other assets, deferred catalog expenses and prepaid expenses, but provided
$152,778 from an increase in accounts payable. The net effect of these changes
and non-cash charges of $72,483 relating to depreciation and amortization, and
the issuance of 200,000 options (valued at $42,000) to the Company CEO in lieu
of accrued compensation, when added to the Company's net loss, resulted in net
cash used by operating activities of $291,680. For the year ended December 31,
1999, the Company purchased property and equipment in the amount of $136,493.
The Company also invested $93,412 in catalog and product development. Financing
activities during 1999 used cash of $54,301 as a result of decrease in due to
affiliates. The Company's ending cash balance decreased to $1,058,390 at
December 31, 1999.

Item 7.           Financial Statements

         The information required by Item 7, and an index thereto commences on
page F-1, which pages follow this page.
<PAGE>
                             THE HAVANA GROUP, INC.
                                AND SUBSIDIARIES

                                FINANCIAL REPORT





                                      F-1
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

                                    CONTENTS



------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                            Page

<S>                                                                                                            <C>
INDEPENDENT AUDITORS' REPORT                                                                                 F-3

FINANCIAL STATEMENTS
    Consolidated balance sheets                                                                         F-4 through F-5
    Consolidated statements of operations                                                                    F-6
    Consolidated statements of stockholders' equity                                                          F-7
    Consolidated statements of cash flows                                                                    F-8
    Notes to consolidated financial statements                                                          F-9 through F-24


</TABLE>




                                       F-2

<PAGE>

                          Independent Auditors' Report

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

         We have audited the accompanying consolidated balance sheets of The
Havana Group, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years 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 on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. 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 that our audits provide a reasonable basis
for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Havana
Group, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States.

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company incurred a net loss of
$1,139,013 during the year ended December 31, 2000, is in default on its loan
agreements and is in arrears on accounts with certain vendor creditors, all of
which raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.




/s/ Hausser+Taylor LLP
    Hausser+Taylor LLP

Canton, Ohio
April 10, 2001 except for note 8,
   which is as of May 17, 2001


                                       F-3
<PAGE>

                THE HAVANA GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED BALANCE SHEETS

                      December 31, 2000 and 1999
<TABLE>
<CAPTION>

                  ASSETS                                                                2000                    1999

      CURRENT ASSETS
<S>                                                                            <C>                     <C>
      Cash, including restricted cash of $18,146                               $             193,898   $          1,058,390
      Accounts receivable, net of allowance
      for doubtful accounts                                                                  650,757                 56,460
      Inventories                                                                          2,410,961                706,070
      Due from affiliates                                                                          -                143,753
      Prepaid expenses                                                                        10,870                 23,171
      Deferred catalog expenses                                                               88,732                 57,357
                                                                                          ----------             ----------
      Total current assets                                                                 3,355,218              2,045,201

      DEFERRED FEDERAL INCOME TAX                                                             29,070                 29,070

      PROPERTY AND EQUIPMENT
      Leasehold improvements                                                                 132,214                 92,244
      Furniture and fixtures                                                                  60,816                 20,571
      Data processing equipment                                                               62,174                 52,343
      Website development                                                                    111,324                110,849
      Machinery and equipment                                                                 68,911                 10,981
                                                                                          ----------             ----------
                                                                                             435,439                286,988
      Less accumulated depreciation                                                          120,040                 51,394
                                                                                          ----------             ----------
                                                                                             315,399                235,594

      OTHER ASSETS, net of accumulated amortization
      Goodwill                                                                               104,564                      -
      Customer lists                                                                         348,361                387,067
         Trademarks                                                                           88,578                      -
      Catalog and product development                                                         23,762                 92,518
      Deposits and other                                                                     213,496                  9,654
                                                                                          ----------             ----------
                                                                                             778,761                489,239
                                                                                          ----------             ----------
                                                                               $           4,478,448   $          2,799,104
                                                                                          ===========            ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       F-4

<PAGE>
                THE HAVANA GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED BALANCE SHEETS

                      December 31, 2000 and 1999
<TABLE>
<CAPTION>

         LIABILITIES AND STOCKHOLDERS' EQUITY                                           2000                    1999

      CURRENT LIABILITIES
<S>                                                                            <C>                   <C>
      Current portion of long-term debt                                        $             168,675 $                    -
      Line of credit                                                                         896,212                      -
      Accounts payable                                                                       551,724                276,734
      Accrued expenses                                                                       282,344                 10,062
      Due to affiliate                                                                       117,146                290,054
      Deferred revenue and customer advances                                                  66,440                  7,679
                                                                                          ----------             ----------
      Total current liabilities                                                            2,082,541                584,529

      LONG-TERM DEBT, net of current portion                                                  767,540                     -

      COMMITMENTS AND CONTIGENCIES                                                                 -                      -

      STOCKHOLDERS' EQUITY
      Preferred stock - $.001 par value, 10,000,000
           shares authorized:
             Series A - 5,000,000 shares issued and outstanding                                5,000                  5,000
             Series B - 1,100,000 shares issued and outstanding
                        (aggregate liquidation preference, including
                          dividends in arrears, totalling $331,100 as of
                          December 31, 2000)                                                   1,100                  1,100
      Common stock - $.001 par value,
          25,000,000 shares authorized, 2,855,000 and
             1,860,000 shares issued and outstanding at
                     December 31, 2000 and 1999, respectively                                  2,855                  1,860
      Additional paid-in capital (including warrants)                                      7,053,132              6,501,322
      Retained earnings (deficit)                                                         (5,433,720)            (4,294,707)
                                                                                          ----------             ----------
      Total stockholders' equity                                                           1,628,367              2,214,575
                                                                               $           4,478,448   $          2,799,104
                                                                                          ===========            ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       F-5
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                     Years Ended December 31, 2000 and 1999
<TABLE>
<CAPTION>



                                                                                      2000                    1999

<S>                                                                          <C>                     <C>
   NET SALES                                                                 $           6,007,895   $           1,551,623

   COST OF SALES                                                                         4,562,817               1,032,582
                                                                               --------------------    --------------------

   GROSS PROFIT                                                                          1,445,078                 519,041

   SELLING EXPENSES                                                                      1,105,957                 463,972

   GENERAL AND ADMINISTRATIVE EXPENSES                                                   1,464,160                 412,931
                                                                               --------------------    --------------------

   LOSS FROM OPERATIONS                                                                 (1,125,039)               (357,862)

   INTEREST INCOME                                                                          35,334                  79,597

   INTEREST EXPENSE                                                                         49,308                  10,183
                                                                               --------------------    --------------------

   NET LOSS                                                                  $          (1,139,013)  $            (288,448)
                                                                               ====================    ====================



   BASIC AND DILUTED LOSS PER SHARE
         AFTER CONSIDERING PREFERRED
         STOCK CUMULATIVE DIVIDEND                                           $               (0.50)  $               (0.21)


</TABLE>

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

                                       F-6

<PAGE>
<TABLE>
<CAPTION>

                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                     Years Ended December 31, 2000 and 1999
                                           Common          Preferred           Paid-In              Retained
                                           Stock             Stock             Capital              Earnings               Total

<S>                                    <C>              <C>                <C>                 <C>              <C>
   BALANCE - JANUARY 1, 1999           $    1,860       $    6,100         $ 6,459,322 $         (4,006,259)      $  2,461,023

   ISSUANCE OF 200,000 OPTIONS TO THE
   COMPANY CEO IN LIEU OF ACCRUED
   COMPENSATION                               -                 -               42,000                 -                42,000

   NET LOSS                                   -                 -                 -                (288,448)          (288,448)

   BALANCE - DECEMBER 31, 1999              1,860            6,100           6,501,322           (4,294,707)         2,214,575

   PROCEEDS FROM THE ISSUANCE OF
   240,000 UNREGISTERED SHARES TO
      COMPANY CEO                             240                -              96,815                 -                97,055

   PROCEEDS FROM THE ISSUANCE OF
   245,000 UNREGISTERED SHARES TO
   SEVEN INVESTORS                            245                -             244,755                 -               245,000

   ISSUANCE OF 60,000 SHARES FOR
   SERVICES PROVIDED                           60                -              41,940                 -                42,000

   ISSUANCE OF 450,000 SHARES FOR THE
   ACQUISITION OF PHILLIPS & KING
   INTERNATIONAL, INC.                        450                -             168,300                 -               168,750

   NET LOSS                                   -                  -                -              (1,139,013)        (1,139,013)

   BALANCE - DECEMBER 31, 2000         $    2,855        $    6,100        $ 7,053,132         $ (5,433,720)      $  1,628,367
                                       ===========       ==========        ===========         =============      =============
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       F-7


<PAGE>
                   THE HAVANA GROUP, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                   Years Ended December 31, 2000 and 1999
<TABLE>
<CAPTION>


                                                                                            2000              1999

        CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                  <C>               <C>
            Net loss                                                                 $     (1,139,013) $        (288,448)
            Adjustments to reconcile net loss to net cash
                used by operating activities:
                    Depreciation and amortization                                             178,333             72,483
          Common stock issued for services                                                     42,000                  -
                  Issuance of 200,000 options to Company CEO in lieu
                  of accrued compensation                                                           -             42,000
                    Decrease (increase) in accounts receivable                                137,532            (10,000)
                    (Increase) in inventories                                                (138,936)          (205,305)
                    (Increase) in deferred catalog expenses                                   (31,375)           (24,585)
                    Decrease (increase) in prepaid expenses                                    52,666            (23,171)
                    (Increase) in deposits and other                                         (166,420)            (7,432)
                    Increase in accounts payable, customer advances
                        and accrued expenses                                                  201,233            152,778
                                                                                       ---------------   ----------------
        Net cash used by operating activities                                                (863,980)          (291,680)

        CASH FLOWS FROM INVESTING ACTIVITIES
        Cash paid to purchase Phillips & King                                                (947,115)                 -
        Cash acquired in the purchase of Phillips & King                                      379,555                  -
           Purchase of property and equipment                                                 (64,355)          (136,493)
        Investment in catalog and product development                                               -            (93,412)
                                                                                       ---------------   ----------------
        Net cash used by investing activities                                                (631,915)          (229,905)

        CASH FLOWS FROM FINANCING ACTIVITIES
           Change in due to/from affiliates - net                                             (29,155)           (54,301)
        Sale of common stock                                                                  342,055                  -
        Borrowings on line of credit                                                          896,212                  -
        Payments on long-term debt                                                           (577,709)
                                                                                       ---------------   ----------------
        Net cash provided (used) by financing activities                                      631,403            (54,301)
                                                                                       ---------------   ----------------
        NET DECREASE IN CASH                                                                 (864,492)          (575,886)

        CASH - BEGINNING                                                                    1,058,390          1,634,276
                                                                                       ---------------   ----------------
        CASH - ENDING                                                                $        193,898  $       1,058,390
                                                                                       ===============   ================
        SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
            Cash paid during the year for interest                                   $         49,308  $          10,183
                                                                                       ===============   ================
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       F-8


<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  Business Description and Summary of Significant Accounting Policies

         A.       Business Description and Principles of Consolidation - The
                  Havana Group, Inc. (Havana) is in the mail order business
                  and sells to customers throughout the United States.  The
                  Company sells tobacco, cigars, smoking pipes and accessories.
                  Products are purchased from a variety of manufacturers.  The
                  consolidated financial statements include the accounts of The
                  Havana Group, Inc., and its two wholly-owned subsidiaries,
                  Phillips & King International, Incorporated. (P&K) and Monarch
                  Pipe Company (collectively, "the Company").  P&K sells and
                  distributes tobacco and related products to wholesalers and
                  retailers in the United States.  Monarch Pipe Company
                  (Monarch) manufactures smoking pipes and sells them
                  exclusively to Havana.  All significant intercompany accounts
                  and transactions have been eliminated in consolidation. Havana
                  grants credit to its tobacco club members.  P&K grants credit
                  to its customers.

         B.       Use of Estimates - The preparation of financial statements in
                  conformity with generally accepted accounting principles
                  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 period. Actual results could
                  differ from those estimates.

         C.       Fair Value of Financial Instruments - The fair value of cash,
                  accounts receivable, accounts payable and other short-term
                  obligations approximate their carrying values because of the
                  short maturities of those financial instruments. The carrying
                  values of long-term debt approximate fair value based on the
                  borrowing rates available to the Company for bank loans with
                  similar terms and average maturities.

         D.       Trade Receivables - It is the Company's policy to record
                  accounts receivable net of an allowance for doubtful accounts.
                  The allowance was $44,548 and $5,500 as of December 31, 2000
                  and 1999, respectively. Bad debt expense was $49,781 and
                  $5,514 for the years ended December 31, 2000 and 1999,
                  respectively.

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

         F.       Deferred catalog expenses are costs of catalogs mailed to
                  customers which are deferred and amortized over approximately
                  six months, the estimated length of time customers utilize
                  catalogs and other mail order mailings. Catalog expense was
                  $434,585 and $274,099 for the years ended December 31, 2000
                  and 1999, respectively.


                                       F-9
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




Note 1.  Business Description and Summary of Significant Accounting Policies
         (continued)

         G.       Property and equipment are carried at cost and depreciated
                  using the straight-line and accelerated methods over their
                  estimated useful lives ranging from five to ten years.
                  Depreciation expense amounted to $68,646 and $32,883 for the
                  years ended December 31, 2000 and 1999, respectively.

                  Maintenance, repairs, and minor renewals are charged against
                  earnings when incurred. Additions and major renewals are
                  capitalized.

         H.       A customer list was obtained by the Company's predecessor,
                  E.A. Carey of Ohio, Inc. in 1984 for $889,000.  The list is
                  being amortized on a straight-line basis through 2008.  At
                  December 31, 2000 and 1999, accumulated amortization was
                  $540,639 and $501,933, respectively.

         I.       Goodwill was recognized as a result of the acquisition of P&K
                  and is being amortized using the straight-line method over 20
                  years. Accumulated amortization was $2,225 at December 31,
                  2000. The Company periodically assesses the goodwill for
                  impairment in accordance with applicable authoritative
                  pronouncements.

         J.       Deferred taxes have been recognized to reflect temporary
                  differences between financial reporting and income tax
                  purposes.  The principal differences are due to net operating
                  losses and the treatment of deferred catalog expense.

         K.       The Company maintains its cash at a financial institution
                  which at times throughout the year exceeds federally insured
                  amounts. Under the terms of the bond agreement with its
                  insurance company, P&K is required to maintain minimum
                  restricted cash balances with a financial institution. The
                  bond is required by the various states in which P&K does
                  business to support excise taxes due in the normal course of
                  business. At December 31, 2000, the restricted balance
                  included in cash on the accompanying consolidated balance
                  sheet was $18,146.



                                      F-10

<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




  Note 1.  Business Description and Summary of Significant Accounting Policies
           (continued)

         L.       Per Share Amounts - Net income per share is calculated using
                  the weighted average number of shares outstanding during the
                  year.  The Company's potentially dilutive securities had no
                  dilutive effect during 1999 or 2000. Additionally, the Company
                  experienced a net loss in 2000 and 1999.  Therefore, no
                  potential common shares have been included in the computation
                  of diluted per share amounts in accordance with Statement of
                  Financial Accounting Standard (SFAS) No. 128, "Earnings per
                  Share."  The weighted average number of common shares
                  outstanding for both basic and diluted earnings per share was
                  2,506,667 and 1,860,000 for 2000 and 1999, respectively.  The
                  2000 and 1999 earnings per share calculations include a charge
                  of $110,000 per year relative to the cumulative dividends on
                  the Series B Preferred Stock.

         M.       New Authoritative Pronouncements - In December 1999, Staff
                  Accountant Bulletin 101, "Revenue Recognition in Financial
                  Statements" was used. SAB101 provides guidance on applying
                  generally accepted accounting principles to revenue
                  recognition issues in financial statements. This statement
                  became effective in the fourth quarter of 2000. The effect of
                  adoption was not material.

         N.       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.

         O.       Reclassification - Certain amounts in the prior year financial
                  statements have been reclassified to conform to the current
                  year presentation.

         P.       Going Concern - The financial statements have been prepared on
                  the basis that the Company will continue as a going concern.
                  However, the Company incurred a net loss of $1,139,013 during
                  the year ended December 31, 2000, is in default on its loan
                  agreements, and is in arrears on accounts with certain vendor
                  creditors which raises substantial doubt about its ability to
                  continue as a going concern. No asset impairment has been
                  recognized and the financial statements do not include any
                  adjustments that might result from the outcome of this
                  uncertainty.



                                      F-11
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


<TABLE>
<CAPTION>


  Note 2.         Inventories

                  Inventories consist of the following at December 31:
                                                                                         2000             1999
                                                                                         ----             ----

<S>                                                                                <C>            <C>
                  Cigarette stamps                                                 $    165,445   $      -
                  Raw materials                                                         146,012          160,401
                  Tobacco, cigars, and pipes                                          1,958,536          518,676
                  Supplies, catalogs, and advances to vendors                           140,968           26,993
                                                                                     ----------         --------
                                                                                    $ 2,410,961        $ 706,070
                                                                                      =========          =======
</TABLE>

  Note 3.         Income Taxes

                  The Company accounts for income taxes in accordance with SFAS
                  No. 109, Accounting for Income Taxes. Deferred income taxes
                  reflect the effects of temporary differences between the
                  carrying amount of assets and liabilities for financial
                  reporting purposes. Deferred tax assets (liabilities)
                  consisted of the following at December 31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                                                          2000            1999
                                                                                          ----            ----
                       Deferred tax assets:
<S>                                                                                    <C>             <C>
                           Net operating loss carryforward                             $ 767,046       $ 372,266
                           Valuation allowance                                          (720,912)       (318,701)
                                                                                         -------         -------
                               Total deferred tax assets                              $   46,134      $   53,565

                       Deferred tax liabilities:
                           Deferred catalog expense                                   $   (8,916)     $  (19,501)
                           Depreciation                                                   (8,148)         (4,994)
                                                                                       ---------       ---------
                               Total deferred tax liabilities                            (17,064)        (24,495)
                                                                                        --------        --------
                       Net deferred tax asset                                         $   29,070      $   29,070
                                                                                        ========        ========
</TABLE>

                  The Company's ability to recognize deferred tax assets is
                  dependent on generating future regular taxable income. In
                  accordance with the provisions of SFAS 109, management has
                  provided a valuation allowance.

                  The Company has net operating loss carryforwards which will
                  expire as follows:

                                      F-12
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



 Note 3. Income Taxes (continued)
<TABLE>
<CAPTION>

                                    Year                                    Amount

<S>                                 <C>                               <C>
                                    2008                              $       6,500
                                    2009                                     57,600
                                    2010                                    105,900
                                    2011                                    121,000
                                    2012                                     74,400
                                    2018                                    403,000
                                    2019                                    326,500
                                    2020                                  1,161,100
                                                                          ---------
                                                                        $ 2,256,000
</TABLE>

 Note 4.          Line of Credit

                  P&K has a demand line of credit agreement with a bank for a
                  credit line of up to $2,000,000. The line incurs interest at
                  prime plus 2.5%. Advances on the line can be up to 85% of
                  P&K's eligible accounts receivable plus the lesser of 50% of
                  approved inventory (as defined) or $1,000,000, less the Tax
                  Reserve (as defined). The line is secured by substantially all
                  assets of P&K. The line of credit is guaranteed by Havana. At
                  December 31, 2000, borrowings on the line totaled $896,212.

                  The line of credit agreement requires P&K to comply with
                  certain covenants including net worth, capital expenditures,
                  and monthly net income. At December 31, 2000, P&K was not in
                  compliance with certain of these covenants, and therefore was
                  in default. The bank has not waived this noncompliance. As
                  described in the agreement, the bank is entitled to increase
                  the interest rate to prime plus 5.5% when default has
                  occurred.

 Note 5.          Long-Term Debt

                  Long-term debt consists of the following as of December 31,
                  2000:
<TABLE>
<CAPTION>
<S>                                                                                                <C>
                      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.                    $ 452,977

</TABLE>
                                      F-13
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




 Note 5.          Long-Term Debt (continued)
<TABLE>
<CAPTION>
<S>                                         <C>                                                    <C>
                      Note payable, Cuba Libre, interest at 7% per annum,
                      due in quarterly installments of $23,603, including
                      interest, through May 2005.                                                  $ 358,238

                      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 May 2005.                                                              125,000
                                                                                                     -------
                                                                                                     936,215
                      Less current maturities                                                        168,675
                                                                                                     -------
                                                                                                   $ 767,540
</TABLE>

                  The scheduled repayment of the notes payable at December 31,
                  2000 is as follows:
<TABLE>
<CAPTION>

                      Year ending December 31,
<S>                           <C>                                                                  <C>
                              2001                                                                 $ 168,675
                              2002                                                                   192,922
                              2003                                                                   224,778
                              2004                                                                   240,931
                              2005                                                                   108,909
                                                                                                   ---------
                                                                                                   $ 936,215
</TABLE>

 Note 6. Lease Commitment

                  Havana Group, Inc. has entered into an operating lease
                  effective January 1, 2000 for warehouse and office space.
                  Prior to January 1, 2000, the Company occupied space in a
                  building owned by Kids Stuff. A portion of the related
                  occupancy costs are allocated to the Company as described in
                  Note 7. Total future minimum lease payments required under
                  this noncancellable operating lease for the years ending
                  December 31 are as follows:

                                    Year                            Amount

                                    2001                          $ 96,000
                                    2002                            96,000

                  Total rent expense was $200,800 and $50,314 for the years
                  ended December 31, 2000 and 1999, respectively.

                                      F-14
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




 Note 7. Agreement with Affiliated Company

                  At December 31, 2000, Duncan Hill, Inc., the parent of The
                  Havana Group, Inc., owns 79% of the outstanding voting capital
                  stock of Kids Stuff, Inc. (Kids Stuff). In January 1998, the
                  Company contracted with Kids Stuff whereby Kids Stuff would
                  provide administrative, executive, and accounting services at
                  an annual cost of approximately $206,100 plus $2.40 per order
                  processed. Havana was also obligated to pay 5% of its 1999 and
                  1998 pre-tax profits to Kids Stuff in connection with these
                  administrative and fulfillment services. However, Havana had
                  no pre-tax profits in 1999 or 1998.

                  During 1999, the agreement was modified and extended on a
                  month-to-month basis as Havana began to incur direct costs for
                  its administrative functions. Havana currently pays to Kids
                  Stuff accounting, data processing, and administrative charges
                  of $30,000 per year plus shipment and warehouse services on a
                  per order basis. Total costs charged to Havana in 2000 and
                  1999 amounted to $35,247 and $225,086, respectively.

 Note 8. Acquisition of Phillips & King International, Incorporated

                  In August 2000, The Havana Group acquired 100% of the common
                  stock of Phillips & King International, Incorporated, a
                  distributor of tobacco and related products to wholesalers and
                  retailers in the United States. 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 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.

                  Phillips & King International, Incorporated was incorporated
                  under the laws of the State of California on June 21, 1982.
                  The Company sells and distributes tobacco and related products
                  to wholesalers and retailers in the United States. In February
                  1999, P&K filed a petition for relief under Chapter 11 of the
                  federal bankruptcy laws in the United States Bankruptcy Court
                  for the Central District of California. In March 2000, P&K
                  filed a Plan of Reorganization with the Bankruptcy Court. The
                  Plan was confirmed on July 5, 2000.


                                      F-15
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




 Note 8. Acquisition of Phillips & King International, Incorporated (continued)
<TABLE>
<CAPTION>

                  The aggregate purchase price is comprised of the following:

<S>                                                                                         <C>
                      Cash                                                                  $    900,000
                      Issuance of 450,000 Havana unregistered common
                          shares to the former owners                                            168,750
                      Acquisition costs                                                           47,115
                                                                                             -----------
                              Total purchase price                                           $ 1,115,865
                                                                                               =========
</TABLE>

                  The purchase price was allocated to the net assets acquired
                  based on fair values as follows:
<TABLE>
<CAPTION>

<S>                                                                                         <C>
                    Cash                                                                    $    379,555

                    Accounts receivable                                                          731,829

                    Inventory                                                                  1,565,955

                    Prepaid expenses                                                              40,365

                    Property and equipment                                                        84,096

                    Trademarks                                                                    88,578

                    Deposits and other                                                            37,422

                    Accounts payable, sales tax payable, and
                        accrued expenses assumed                                                (404,800)

                    Notes payable assumed                                                     (1,513,924)
                                                                                              -----------

                            Net assets acquired                                                1,009,076

                    Excess of the purchase price over fair market
                        value of assets acquired                                                 106,789
                                                                                              -----------

                            Total purchase price                                             $ 1,115,865
                                                                                              ===========

</TABLE>

                                      F-16

<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




   Note 8.        Acquisition of Phillips & King International, Incorporated
                  (continued)

                  The excess of the aggregate purchase price over the fair
                  market value of net assets acquired of $106,789 was recorded
                  as goodwill.

                  The following summary presents 2000 and 1999 unaudited pro
                  forma consolidated results of operations as if the acquisition
                  had occurred on the first day of each year. The pro forma
                  results are for illustrative purposes only and do not purport
                  to be indicative of the actual results which would have
                  occurred had the transaction been consummated as of an earlier
                  date, nor are they indicative of results of operations which
                  may occur in the future. These results do not reflect any
                  synergies that may or may not be achieved.
<TABLE>
<CAPTION>

                                                                                      Unaudited Pro Forma
                                                                                 Year Ended December 31,
                                                                                     2000                1999
                                                                                     ----                ----

<S>                                                                             <C>              <C>
                           Sales                                                $ 13,068,652     $ 15,420,247

                           Net loss                                               (1,301,279)      (1,610,036)

                           Net loss, applicable to common stock
                             (after preferred stock dividends of
                               $110,000 per year)                                 (1,411,279)      (1,720,036)

                           Loss per share                                               (.56)            (.92)
</TABLE>

                  Expenditures totaling $143,000 were paid subsequent to the
                  acquisition for items relating to and on behalf of the former
                  owners of P&K. Management considers these amounts as
                  recoverable, and the amount is included in deposits and other
                  on the accompanying balance sheet as of December 31, 2000.

   Note 9.        Stockholders' Equity

         A.       Common Stock

                  The Havana Group, Inc. has 25,000,000 shares of $.001 par
                  value common stock authorized.  The holders of Common
                  shares are entitled to one vote on all stockholder matters.

                                      F-17

<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




   Note 9.        Stockholders' Equity (continued)

                  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.

                  Additionally, 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.

         B.       Series A Preferred Stock

                  The Board of Directors has the authority, without further
                  action by the stockholders, 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. 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-18
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




   Note 9.        Stockholders' Equity (continued)

         C.       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 2000 or 1999 on the
                  Series B Preferred Stock. Dividends in arrears on the Series B
                  preferred stock amount to $.30 per share or $330,000 in the
                  aggregate at December 31, 2000.

                  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.

         D.       Class A Warrants

                  As of December 31, 2000, the Company has 2,658,000 Class A
                  warrants outstanding, which is comprised of 920,000 warrants
                  included in the units sold in the Company's initial public
                  offering; 1,400,000 warrants issued in conjunction with the
                  conversion of a note payable; 138,000 warrants issued to
                  Duncan Hill in replacement of warrants issued in conjunction
                  with the reorganization; and 200,000 warrants issued to Mr.
                  William Miller, the Company's CEO.



                                      F-19

<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




   Note 9.        Stockholders' Equity (continued)

                  Each Class A warrant entitles the holder to purchase one share
                  of common stock at a price of $5.25 and expires May 2003. The
                  Company may redeem the Class A warrants at a price of $.10 per
                  warrant effective May 1999, upon not less than 30 days' prior
                  written notice, if the closing bid price of the common stock
                  has been at least $10.50 per share for 20 consecutive trading
                  days ending no more than the 15th day prior to the date on
                  which the notice of redemption is given.

Note 10.          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 2000 and 1999.

  Note 11.        Employment Agreements

         A.       The Company entered into a five-year employment agreement with
                  William L. Miller effective December 1, 1997, pursuant to
                  which Mr. Miller is to serve as Chief Executive Officer and
                  President of the Company. The employment agreement provides
                  for an annual base salary of $50,000, increasing to at least
                  $100,000 for the remainder of the contract if the Company's
                  revenues for any fiscal year exceed $5,000,000. As the
                  Company's revenues exceeded $5,000,000 for the year ended
                  December 31, 2000, the Company accrued $100,000 as Mr.
                  Miller's compensation. The amount is unpaid as of April 10,
                  2001.


                                      F-20

<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




  Note 11.        Employment Agreements (continued)

                  Mr. Miller was granted under his employment agreement 200,000
                  Common Stock Purchase warrants at $6.00 per share. The
                  warrants were converted into Class A warrants upon the
                  completion of the Companies' initial public offering, bearing
                  the same terms and conditions as those Class A warrants issued
                  by the Company being registered.

                  Mr. Miller was also granted under his employment agreement an
                  option to purchase 200,000 shares of the Company's Common
                  Stock, which will vest 20% on each of the following dates:
                  December 1, 1997; January 1, 1998; January 1, 1999; January 1,
                  2000; and January 1, 2001, regardless of whether the executive
                  is employed on such dates by the Company. The vested options
                  will be immediately exercisable and will expire 10 years from
                  the date of the agreement. The exercise price of the options
                  will be $6.00 per share, subject to downward adjustment. The
                  exercise price for vested options may be decreased if (a) the
                  Company meets certain performance goals, and (b) Mr. Miller
                  timely elects to "lock-in" a lower exercise price with respect
                  to his vested options. The exercise price for vested options
                  may be reduced by $1.00 per share for each $200,000 of pre-tax
                  income of the Company for the prior fiscal year. The Company
                  shall report to Mr. Miller, promptly upon audited financial
                  statements for the prior fiscal year becoming available, the
                  pre-tax income of the Company for that year. Mr. Miller shall
                  have thirty days in which to decide, with respect to his
                  vested options for which an alternative exercise price has not
                  previously been locked-in, whether to adjust the exercise
                  price of such vested options based upon the pre-tax income of
                  the Company for the prior year.

                  Mr. Miller's contract allows for termination by the Company
                  for cause. If the agreement is terminated by the Company
                  without cause, or by Mr. Miller due to a material change in
                  his responsibilities, functions, or duties, the Company shall
                  pay Mr. Miller a lump sum on the date of termination as
                  severance pay an amount equal to 2.99 times the sum of Mr.
                  Miller's salary and bonus paid in the year prior to the year
                  of termination.





                                      F-21
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




Note 11.          Employment Agreements (continued)

         B.       The Company entered into an employment agreement effective
                  February 1, 1999 through December 31, 2002 with Gary J.
                  Corbett whereby Mr. Corbett will serve as the Company's
                  President at an annual base salary of $80,000 plus bonus to be
                  determined by the Board of Directors. He was also granted
                  options to purchase 80,000 shares of the Company's common
                  stock at an exercise price of $3.50 per share subject to
                  downward adjustments in the exercise price if the Company
                  meets certain performance goals. The options vest 25% on March
                  1, 1999 and 25% on each of the first, second, and third
                  anniversary dates of the employment agreement.

Note 12.          Fair Value of Stock Based Compensation

                  In 1999, in addition to the options to purchase 200,000 shares
                  of common stock and Common Stock Purchase Warrants to purchase
                  200,000 shares of common stock issued to Mr. Miller and the
                  options to purchase 80,000 shares of common stock issued to
                  Mr. Corbett (all described in Note 11), the Company has
                  granted options to purchase 60,000 shares of common stock to
                  certain directors (see Note 13).

                  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, 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, and options to
                  purchase 10,000 shares to Gary Corbett were cancelled and
                  regranted. The regranted options expire December, 2007.
                  Additionally, 30,000 options to purchase the Company stock at
                  an exercise price of $.4044 were granted to Clark Swisher, a
                  Director of the Company.

                  The Company accounts for employee stock options under APB 25
                  and, accordingly, no compensation cost has been recognized. If
                  the Company had elected to recognize compensation cost
                  consistent with the method prescribed by SFAS 123, the
                  Company's net loss would have been increased by approximately
                  $241,500 or $.13 per share for the year ended December 31,
                  1999, and $117,000 or $.05 per share for the year ended
                  December 31, 2000.


                                      F-22
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




Note 12.          Fair Value of Stock Based Compensation (continued)

                  For purposes of the pro forma disclosures presented above, the
                  Company computed the fair values of options granted using the
                  Black-Scholes option pricing model assuming no dividends, 211%
                  volatility, an expected life of 50% of the option terms, and a
                  risk-free interest rate of 6.0%. The fair value of Class A
                  warrants issued to Mr. Miller was calculated as the value of
                  compensation forgone in return for the warrants. No options or
                  warrants have been exercised as of December 31, 2000 and 1999.

Note 13.          Non-Qualified Stock Option Agreement

                  During 1998, the Company entered into a non-qualified stock
                  option agreement with John Cobb, Jr. and Peter Stokkebye,
                  directors of the Company. Each of Mr. Cobb and Mr. Stokkebye
                  were granted the option to purchase 30,000 shares of the
                  Company's common stock, which will vest 25% on January 29,
                  1998 and 25% on each January 29, 1999, January 29, 2000, and
                  January 29, 2001. The vested options will be immediately
                  exercisable and will expire 10 years from the date of the
                  agreement. The exercise price of the options shall be $6.00
                  per share of common stock, subject to downward adjustment.
                  Effective August 2000, Mr. Stokkebye resigned and is no longer
                  a Director of the Company.

                  The exercise price for vested options may be decreased if (a)
                  the Company meets certain performance goals, and (b) the
                  director timely elects to "lock-in" a lower exercise price
                  with respect to his vested options. The exercise price for
                  vested options may be reduced by $1.00 per share for each
                  $200,000 of pre-tax income of the Company for the prior fiscal
                  year. The Company shall report to the director, promptly upon
                  audited financial statements for the prior fiscal year
                  becoming available, the pre-tax income of the Company for that
                  year. The director shall have thirty days in which to decide,
                  with respect to his vested options for which an alternative
                  exercise price has not previously been locked-in, whether to
                  adjust the exercise price of such vested options based upon
                  the pre-tax income of the Company for the prior year.

                  The pro forma effect on the net loss of the Company of the
                  fair value of the options is included in the disclosure in
                  Note 12.




                                      F-23
<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




Note 14.          Profit-Sharing Plan

                  P&K has a defined-contribution profit-sharing plan covering
                  all eligible employees. Company contributions are made at the
                  discretion of the Board of Directors. Employees may contribute
                  from 1% to 15% of eligible compensation. The Company made no
                  contributions to the plan for the year ended December 31,
                  2000.

Note 15.          Concentration of Creditors

                  P&K acquires its product for sale through wholesale
                  distribution from numerous domestic and international vendors,
                  either directly from the manufacturers r domestic vendors.
                  The Company currently has six vendors that supply more  than
                  10% of its product.  These companies include:  Villazon Co.,
                  Lane Limited, General Cigar Co., Inter-Continental Cigar Co.,
                  Nat Sherman Inc., and Consolidated Cigar Corp.  Any disruption
                  of service from any of these companies may have an adverse
                  effect on the Company's future sales.  Although these
                  suppliers provide a substantial portion of the Company's
                  catalog product, the Company believes that many products can
                  be sourced from alternate suppliers.

                  Havana acquires products for resale in its catalogs from
                  numerous domestic and international vendors. All "Carey" and
                  "Duncan Hill" pipes are manufactured by the Company's
                  wholly-owned subsidiary, Monarch. Monarch supplies
                  approximately 11% of the Company's catalog products. Other
                  than Monarch and Phillips & King International, Incorporated,
                  the Company currently has two vendors that supply more than
                  10% of its catalog products. These companies include: Peter
                  Stokkebye International, Inc. (28%) and CTC Industries, Inc.
                  (12%). Any disruption of service from any of these companies
                  may have an adverse effect on the Company's future sales.
                  Although these suppliers provide a substantial portion of the
                  Company's catalog product, the Company believes that, with the
                  exception of products made by Monarch, most products can be
                  sourced from alternative suppliers. The Company acquires
                  products for sale in the retail store from numerous domestic
                  vendors.


                                      F-24

<PAGE>
                     THE HAVANA GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




 Note 16.         Commitments and Contingencies

         A.       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
                  the opinion of management, there are currently no outstanding
                  claims that would materially affect the financial position of
                  the Company.

         B.       P&K has been informed by the State of Oregon that P&K owes
                  approximately $240,000 to the State for tobacco tax, late
                  payment penalties, and interest for the years 1996 through
                  1998. However, this claim was not filed by the State of Oregon
                  with the Bankruptcy Court during P&K's bankruptcy period.
                  Management believes that the Company will not ultimately be
                  liable for the amounts claimed by the State of Oregon, and
                  such liability, if any, would be the responsibility of the
                  former owners of P&K.






                                      F-25
<PAGE>

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

         Not applicable.

                                       20
<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:
<TABLE>
<CAPTION>
                                               First
                                               Term of             Became                 Principal
Name                                Age        Office              Director               Occupation
----                                ---        --------            --------             --------------

<S>                                  <C>       <C>                   <C>                <C>
William L. Miller                    64        (1)                   1997               Chairman of the
                                                                                        Board, Chief
                                                                                        Executive Officer,
                                                                                        And Principal
                                                                                        Financial Officer of
                                                                                        The Company

John W. Cobb, Jr.                    59        (1)                   1997               Director of Marketing
                                                                                        Global Outreach
                                                                                        University of Maryland

Clark D. Swisher                     49        (1)                  3/31/00             Vice President,
                                                                                        Employee Benefits
                                                                                        Division of Leonard
                                                                                        McCormick Agency
-----------
</TABLE>

     (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.



                                       21
<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.  Mr.  Corbett's
merchandising ability permits the Company to strengthen its direction in premium
cigars and extend its  marketing  reach to other  tobacco areas in the lower and
mid-price range. Mr. Corbett attended California State University.

     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  10/99.  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 serves 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 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.


                                       22
<PAGE>
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, 2000, except
that Mr. Peter Stokkebye VI did not file a Form 4 to reflect his ceasing to be a
director of the Company.



                                       23
<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.

SUMMARY COMPENSATION TABLE
<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                               Bonus       -sation     Award(s)      Number of    Payouts      -sation
Position            Year    Salary ($)    ($)          ($)      Options(3)    Options         ($)         ($)
------------------ ------- ----------- ---------- ----------- ------------ ------------- ------------- -------------

<S>     <C>        <C>           <C>       <C>      <C>            <C>     <C>                <C>           <C>
W. Miller,
Chief Executive
Officer (1)(2)     2000         -0-       -0-       3,600         -0-      200,000 (3)       -0-           -0-
                   1999         -0-       -0-       3,600         -0-      200,000           -0-           -0-

                   1998     46,400        -0-       3,600         -0-(1)        -0-          -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.

                                       24
<PAGE>
                               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.

                        Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>

============================================================================== ==========================================

                                                                                               Potential
                                                                                          Realizable Value at
                                                                                             Assumed Annual
                              Individual Grants                                    Rates of Stock Price Appreciation
                                                                                          for Option Term (2)
--------------------- ------------ --------------- ------------- ------------- ---------------- -------------------------

        (a)               (b)           (c)            (d)           (e)             (f)                  (g)
                                      % of
                                      Total
                                    Options/
                                   Granted to
                        Options      Employees       Exercise      Expira-
                        Granted      in Fiscal        Price          tion
        Name              (#)         Year (1)        ($/Sh)         Date           5% ($)              10% ($)

<S>                   <C>                <C>            <C>         <C>   <C>        <C>                        <C>
William L. Miller     200,000(3)         95%          ...4044       12/01/07         33,000                     77,000
===================== ============ =============== ============= ============= ================ =========================
</TABLE>


     (1) The percentage of total options granted to employees in fiscal year is
based upon options granted to officers, directors and employees.

     (2) The potential realizable value of each grant of options assumes that
the market price of Havana's Common Stock appreciates in value from the date of
grant to the end of the option term at annualized rates of 5% and 10%,
respectively, and after subtracting the exercise price from the potential
realizable value.

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

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/WARRANT VALUES
<TABLE>
<CAPTION>

         The information provided in the table below provides information with
respect to each exercise of the Company's stock option during fiscal 2000 by the
Company's Chief Executive Officer and the fiscal year end value of the Company's
unexercised options.

========================== ============== =============== ========================= =============================

           (a)                  (b)            (c)                  (d)                         (e)

                                    Number of
                              Securities Underlying
                                                                Unexercised                   Value of
                                                               Options/Warrants             Unexercised
                              Shares                            at FY-End (#)               In-the-Money
                            Acquired on                         Exercisable/              Options/Warrants
          Name             Exercise (#)       Value             Unexercisable               at Fy-End($)
                                             Realized                                       Exercisable/
                                              ($)(1)                                     Unexercisable (1)

<S>                              <C>            <C>           <C>      <C>                    <C> <C>
William L. Miller               -0-            -0-            400,000/-0-                    -0-/-0-

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

                                       25
<PAGE>
     (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.

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.


                                       26
<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.

                                       27
<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 (it being noted that Miller elected not to participate in the
$200,000 bridge financing); 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.

         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.


                                       28

<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.

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.

                                       29
<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 regranted them in
February 2000. In February 2000, the Board of Directors granted Clark D. Swisher
options to purchase 30,000 shares of the Company's Common Stock. In August 2000,
Mr. Stokkebye resigned from the Board of Directors.

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, 2001, 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.


                                       30
<PAGE>
<TABLE>
<CAPTION>

                                                                                          Shares of Series A and B
                                                          Shares of                            Preferred Stock
                                                         Common Stock                        Beneficially Owned
                                                      Beneficially Owned
                                             -------------------------------------     --------------------------------
  NAME AND ADDRESS OF                           NUMBER           PERCENT (3)            NUMBER          PERCENT(4)
                                                ------           ------- ---            ------          ----------
  BENEFICIAL OWNER (1)

<S>              <C>                             <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.


                                       31
<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, 2000.

         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.


                                       32

<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.

                                       33
<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
       5.0   Opinion of Lester Morse P.C.
      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 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, 2000, a Form 8-K was
not filed or required to be filed.



                                       34
<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 23, 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:
<TABLE>
<CAPTION>

         Signatures                    Titles                                            Date

<S>                                    <C>                                          <C>
/s/ William L. Miller                  Chairman of the
William L. Miller                      Board, Chief Executive Officer,
                                       Principal Financial Officer,
                                       Treasurer and Secretary                      May 23, 2001

/s/ John Cobb
John Cobb                              Director                                     May 23, 2001

/s/ Clark D. Swisher
Clark D. Swisher                       Director                                     May 23, 2001
</TABLE>

                                       35