<PAGE>
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                                   (Mark One)

      |X|   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
            ACT OF 1934

                    For Fiscal Year Ended: December 31, 2001

                                       OR

      |_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

       For the transition period from _______________ to _______________

                        Commission file number: 000-30158

                              HARMONY TRADING CORP.
        (Exact name of small business issuer as specified in its charter)

                NEW YORK                                      13-3935933
     (State or other jurisdiction of                         (IRS Employer
     incorporation or organization)                       Identification No.)


          300 ST. SACREMENT, SUITE 414
            MONTREAL, QUEBEC, CANADA                           H2Y 1X4
    (Address of principal executive offices)                (Postal Code)

Issuer's telephone number: (514) 286-0909

Securities registered under Section 12(b) of the Act: NONE

Securities registered under Section 12(g) of the Act: COMMON STOCK, PAR VALUE
                                                      $0.000333 PER SHARE

Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes |X| No
|_|

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

State registrant's revenues for its most recent fiscal year: $17,013.

As of March 28, 2002, there were 9,380,000 shares of the registrant's common
stock, par value $0.000333, issued and outstanding. Of these, 4,175,000 shares
are held by non-affiliates of the registrant. The market value of securities
held by non-affiliates is $5,949,375 based on the average sales price of $1.425
for the registrant's common stock on March 28, 2002.

Transitional Small Business Disclosure Format (check one): Yes |_|; No |X|

                       DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933, as amended ("Securities Act").

   Not Applicable.
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item Number and Caption                                                      Page
-----------------------                                                      ----
<S>                                                                          <C>
Forward-Looking Statements ................................................    3

                                     PART I

1.   Description of Business ..............................................    3

2.   Description of Property ..............................................    8

3.   Legal Proceedings ....................................................    8

4.   Submission of Matters to a Vote of Security Holders ..................    8

                                     PART II

5.   Market for Common Equity and Related Stockholder Matters .............    8

6.   Management's Discussion and Analysis of Financial Condition
     and Results of Operations ............................................    9

7.   Financial Statements .................................................   11

8.   Changes in and Disagreements with Accountants on Accounting
     and Financial Disclosure .............................................   11

                                    PART III

9.   Directors, Executive Officers, Promoters and Control Persons;
     Compliance with Section 16(a) of the Exchange Act ....................   11

10.  Executive Compensation ...............................................   12

11.  Security Ownership of Certain Beneficial Owners and Management .......   13

12.  Certain Relationships and Related Transactions .......................   14

13.  Exhibits, List and Reports on Form 8-K ...............................   14
</TABLE>


                                       2
<PAGE>
                           FORWARD-LOOKING STATEMENTS

      Except for historical information, this report contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements involve risks and uncertainties, including, among other things,
statements regarding our business strategy, future revenues and anticipated
costs and expenses. Such forward-looking statements include, among others, those
statements including the words "expects," "anticipates," "intends," "believes"
and similar language. Our actual results may differ significantly from those
projected in the forward-looking statements. Factors that might cause or
contribute to such differences include, but are not limited to, those discussed
in the section "Management's Discussion and Analysis of Financial Condition and
Results of Operations". You should carefully review the risks described in other
documents we file from time to time with the Securities and Exchange Commission.
You are cautioned not to place undue reliance on the forward-looking statements,
which speak only as of the date of this report. We undertake no obligation to
publicly release any revisions to the forward-looking statements or reflect
events or circumstances after the date of this document.

                                     PART I

                         ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

      Harmony Trading Corp., a New York corporation, was formed on August 13,
1996. We remained inactive until December 1998, when we became a direct seller
for Doncaster, a division of Tanner Companies. Doncaster is a manufacturer of
women's apparel and accessories.

      Our business is the direct selling of Doncaster women's apparel and
accessories. Doncaster is a division of Tanner Companies Limited Partnership
("Tanner"), which is based in Rutherfordton, North Carolina. Direct selling is
the sale of a consumer product or service in a face-to-face manner away from a
fixed retail location. We, through our two independent contractors, Falene
Gottbetter and Roberta Winley, market the Doncaster line through fashion shows
and private appointments. Initially, Mrs. Gottbetter entered into a fashion
consultant agreement with Tanner. Tanner and Mrs. Gottbetter verbally agreed to
allow us to assume the fashion consultant agreement from Mrs. Gottbetter.
Subsequent to the period covered by this Report, we added a third independent
contractor Judy Cohen.

      Under the agreement with Tanner, we receive a sales kit four times a year,
one for each seasonal collection. We pay $180 to Doncaster for each sales kit,
but that money will be refunded if we decide not to continue selling Doncaster.
The sales kit includes brochures for trunk show mailings, a look book which
contains a detailed description of every item, fabric and color swatches,
pictures of every item in the collection, a size chart and a pricing sheet. The
agreement is on-going and can be terminated either by us or by Tanner on thirty
(30) days written notice. The agreement provides that we will not show
competitive products at the same time that we are showing Doncaster apparel. We
must sell, after returns and credits, a minimum of $10,000 per collection in
order to remain a fashion consultant for Doncaster.


                                       3
<PAGE>
      We are in the District 39 selling district. Although we are geographically
based in Westchester County, New York, we are not limited to selling to
customers only located in Westchester, and we sell to anyone wherever located.
We are not the only Doncaster fashion consultant in District 39. District 39
consists of the counties of Orange, Rockland, Nassau, Westchester and New York.
There are approximately 28 other Doncaster fashion consultants in District 39.
The district managers set sales goals for the fashion consultants based on the
previous collection's sales. These goals are only guidelines, and the fashion
consultants are not penalized if the goals are not met.

      Each Doncaster sales district has a district manager. The district manager
is responsible for coordinating the scheduling of all the trunk shows in the
district, the receipt of the trunk show clothing collection and keeping the
fashion consultants in communication so the trunk show collection is delivered
to every fashion consultant on time. The district manager works with the fashion
consultants when they are having problems with Doncaster in having orders
delivered, having returns credited and having back orders filled. Doncaster also
has regional managers. The regions consist of several states. The regional
managers have similar responsibilities to the district manager but on a larger
scale.

      Doncaster has district training services once a month for all fashion
consultants in each sales district. The seminars are held at Doncaster's
showroom in New York, New York. At the district training seminars, Doncaster
fashion consultants meet with the district sales manager to discuss customer
complaints, selling techniques and Doncaster merchandise.

      Doncaster also holds regional meetings for its fashion consultants four
times per year, which include districts from several states. At the regional
meetings, Doncaster presents a fashion show of its new collection, has a
question and answer session for its fashion consultants, and presents awards to
its top sellers. Both Mrs. Gottbetter and Ms. Winley have received awards for
their selling efforts. Doncaster holds one annual meeting for its fashion
consultants.

      There are four trunk shows every year, one for each collection. We have
our trunk shows in the home of Paul and Falene Gottbetter. Each trunk show lasts
for one week. For the second to fourth week prior to a trunk show, Mrs.
Gottbetter devotes approximately 16 hours per week preparing for the show. Ms.
Winley devotes approximately 50 hours per week for the same period. During this
three-week period, Mrs. Gottbetter and Ms. Winley create a mailing on the show
and send the mailing to the customers on our client list. They also begin making
appointments to show clients the collection during the show.

      The week prior to the show Mrs. Gottbetter devotes approximately 24 hours
to our business and Ms. Winley devotes approximately 4 hours. During this time,
they prepare the Gottbetter's home for the show and schedule appointments.
During the week of the trunk show and the week after the trunk show, both Mrs.
Gottbetter and Ms. Winley devote approximately 40 hours each per week to our
business, showing clients the collection and taking orders. The week after the
trunk show is spent following up with Doncaster on the orders. During the rest
of the year, Mrs. Gottbetter spends approximately 10 hours a week on our
business and Ms. Winley spends about 25 hours a week.


                                       4
<PAGE>
      In our opinion and those of our independent contractors, Doncaster's
clothing is comparable in quality and styling to DKNY, Donna Karan, Dana Buchman
and other high end contemporary clothing lines. Our success depends in
substantial part upon Doncaster's ability to anticipate and respond to changing
consumer preferences and fashion trends in a timely manner. Although Doncaster
attempts to stay abreast of emerging lifestyle and consumer preferences
affecting its merchandise, any failure by Doncaster to identify and respond to
such trends could have a material adverse effect on our business.

      Doncaster's line of clothing consists of separate pieces to allow women
versatility in mixing matching items. The line includes pants, blazers,
sweaters, blouses, skirts, shorts, camisoles, and dresses. In addition,
Doncaster offers accessories including jewelry, belts and scarves. Doncaster has
four seasonal collections, Spring, Spring/Summer, Fall and Fall/Winter. The
collections are introduced on the following schedule - Fall in July, Fall/Winter
in September, Spring in January, and Spring/Summer in May. Within each season's
collection, there are various style/theme collections.

      Doncaster has been in business since 1931, and we have been a direct
seller of Doncaster clothing and accessories since December 1998. We rely on our
mailing list, referrals and national advertising by Doncaster in order to
increase our customer base. We currently have a mailing list of approximately
200 names to which we send announcements of the trunk shows and preview shows
during the year.

      The trunk show lasts for one week, and it is by appointment. Customers
make appointments to view the current collection, try on different pieces and
place orders. The client can look at various colors and fabrics in a "look book"
for the current season's collection. If a client is unable to attend the trunk
show, we can make an appointment for them to view the collection at Doncaster's
New York showroom. Doncaster's offices in New York City are open during regular
business hours. However, we are able to obtain after hours access to the
showroom with advance notice to Doncaster.

      We forward a client's order to Doncaster by phone or fax. The customer is
not billed for the order until Doncaster ships the order to the client. The
order can be shipped directly to the client or to Doncaster's New York showroom.
Doncaster employs a dressmaker who can make alterations to the clothing.
Clothing which has not been altered or worn can be returned to Doncaster for a
full refund within thirty days of receipt.

      We also obtain clients from referrals by Doncaster in response to its
national advertising campaign in magazines like as Harper's Bazaar, Town &
Country Mode, and Vogue. Doncaster will give the name and telephone number of a
consultant in a potential client's area in response to calls Doncaster receives
from the public inquiring about its merchandise.

      We run fashions shows for various organizations, including but not limited
to, women's groups, church groups and other women's organizations. For each
season, Doncaster provides a fashion show set which a consultant can obtain from
Doncaster's district manager.

      The women's apparel retail industry is highly competitive and fragmented.
We compete with large specialty retailers, traditional and better department
stores, national apparel chains,


                                       5
<PAGE>
designer boutiques, individual specialty apparel stores and other direct
marketing firms. We do not have to compete with these other businesses for
merchandise since we only order merchandise for individual clients directly from
Doncaster. However, Doncaster only manufactures a fixed number of pieces of each
item and the pieces are sold on a "first-come, first-serve basis." Most of our
competitors are larger, have greater financial resources and a more varied
selection of clothing than we do. Our success is dependent in part upon
initiating and maintaining strong relationships with our clients and the quality
and value of the Doncaster clothing.

      In addition to selling Doncaster, our independent contractors also act as
fashion consultants. As fashion consultants they:

      -     teach people how to put different outfits together using the same
            items of clothing;

      -     act as wardrobe consultants and assist clients in throwing away the
            old clothes that they have been saving; and

      -     assist the clients in evaluating which styles and colors are the
            most suitable for them.

      Our independent contractors also act as fashion consultants directly in
connection with their selling of the Doncaster line. We do not currently charge
for this service because we have found that our clients, after consulting with
us, tend to purchase more items in order to update or create a new look.

      As of April 1, 2002, we had no employees other than our two executive
officers. We had three independent contractors, Falene Gottbetter, Roberta
Winley and Judy Cohen. Falene Gottbetter is the wife of our former President,
Paul B. Gottbetter. The decision to have them act as independent contractors is
for tax purposes. By classifying Mrs. Gottbetter, Ms. Winley and Mrs. Cohen as
independent contractors and not employees, we are not responsible for paying
unemployment taxes, disability or social security taxes, providing benefits like
pension or medical plans, providing paid vacation or withholding taxes. The
benefit to us is that our record keeping is simpler. We pay our consultants a
commission and give them a Form 1099 for their yearly taxes. Our consultants are
considered independent consultants because they do not have an employment
contract with us, they have no regular hours and they are paid on a commission
basis.

SUBSEQUENT EVENTS

      Subsequent to the period covered by this report, on March 27, 2002 we
entered into a Reorganization Agreement (the "Reorganization Agreement") with
Group Intercapital Inc., a Canadian corporation and our principal shareholder
("GIC"), Nuvo Way Inc., a Canadian corporation ("Nuvo"), Heather Baker and the
shareholders of Nuvo (the "Nuvo Shareholders"). The Reorganization Agreement
principally involved our acquisition of all of Nuvo's issued and outstanding
capital stock, making Nuvo a wholly owned subsidiary of ours, in exchange for
5,000,000 shares of our restricted common (the "Harmony Common Stock") and the
cancellation by GIC of 2,980,000 shares of our common stock owned by it.
1,666,666 shares of the Harmony Common Stock were delivered to the Nuvo
Shareholders on April 3, 2002 (the "Closing Date"), the closing date under the
Reorganization Agreement. 1,666,667 shares of the Harmony Common Stock are to be
issued to the Nuvo Shareholders on each of the first and second


                                       6
<PAGE>
anniversaries of the Closing Date. On the Closing Date, the Nuvo Shareholders
also received an aggregate of 3,333,334 shares of our Series A Preferred Stock.
The Series A Preferred Stock is pari passu with our common stock with respect to
voting, dividend and liquidation rights and is automatically redeemable in
direct proportion to, and at the time of issuance of, the Harmony Common Stock
to be issued on the first and second anniversaries of the Closing Date.

      In connection with the Reorganization Agreement, as amended on April 3,
2002, effective upon the filing of this Annual Report on Form 10-KSB with the
Securities and Exchange Commission (the "Filing Date"), our executive officers,
Henry Yersh and Denis St. Hilaire, will resign and be replaced by Heather Baker
and James Klein, designees of the Nuvo Shareholders. Heather Baker will be
appointed to the positions of president and chief executive officer while James
Klein will be appointed to the positions of treasurer, secretary and chief
financial officer. Effective the Closing Date, our board of directors was
increased from two to five members. Heather Baker and James Klein, as designees
of the Nuvo Shareholders, have been appointed to fill two of the vacancies
created thereby effective immediately after the filing of this Annual Report on
the Filing Date. Following the Closing Date, GIC and the Nuvo Shareholders have
agreed to use their best efforts to mutually locate and designate a fifth
director for appointment to the board of directors. GIC and the Nuvo
Shareholders have further agreed to vote their voting shares of our common stock
in the future, with respect to all votes taken by us for the election of
directors, so as to maintain a board that consists of an equal number of
directors designated by GIC and the Nuvo Shareholders.

      The Reorganization Agreement further provides for the establishment of a
non-statutory stock plan, the issuance of 150,00 stock options under the plan
(the "Stock Options") to certain persons designated by Nuvo, the registration of
the shares underlying the Stock Options on a Form S-8 Registration Statement,
the execution of an employment agreement with Heather Baker on terms to be
negotiated whereby Ms. Baker will serve as our president and chief executive
officer, the issuance of 100,000 shares (the "Baker Shares") of our common stock
under the Baker Employment Agreement as a signing bonus, the registration of the
Baker Shares on a Form S-8 Registration Statement, and the issuance of 100,000
shares of our restricted common stock to two contractors with whom Nuvo does
business. In connection with the Reorganization Agreement, we also intend to
promptly take all necessary steps to change our name to Vital State Inc. and to
change the name of Nuvo to Vital State Canada Limited.

      Nuvo is a health supplement and pharmaceutical company based in Montreal,
Canada. It has developed a unique method of orally delivering nutritional
supplements which promotes greater absorption through its new patent pending
technology.

      On April 5, 2002 we reached agreement with our independent contractors to
discontinue our activities as a direct seller of the Doncaster clothing line. In
connection therewith, we assigned all of our rights under our verbal agreement
with Tanner to the contractors who will continue to sell the Doncaster line
directly for Tanner.


                                       7
<PAGE>
                         ITEM 2. DESCRIPTION OF PROPERTY

      We maintain our executive offices at 300 St. Sacrement, Suite 414,
Montreal, Quebec, Canada, which is the executive offices of our controlling
stockholder, Group Intercapital Inc. At such location, we are provided with
approximately 120 square feet of office space on a rent-free basis.

                            ITEM 3. LEGAL PROCEEDINGS

      No legal proceedings are pending to which we or any of our property is
subject, nor to our knowledge are any such proceedings threatened.

           ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.

                                     PART II

        ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

      Our common stock has been traded on the NASD Over-the-Counter Bulletin
Board under the symbol HRMY since July 3, 2000. The following table sets forth,
for the fiscal quarters or periods indicated, the high and low bid prices per
share of our common stock as reported on the NASD Over-the-Counter Bulletin
Board. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not represent actual transactions. The prices
set forth below for periods subsequent to December 4, 2000 reflect the
three-for-one stock split which took place on December 5, 2000.

<TABLE>
<CAPTION>
                                                                 COMMON STOCK
                                                             HIGH BID    LOW BID
                                                             --------    -------
<S>                                                          <C>         <C>
       YEAR ENDED DECEMBER 31, 2001

            Quarter ended March 31, 2001                       1.75        .375

            Quarter ended June 30, 2001                        1.25        .625

            Quarter ended September 30, 2001                   1.15         .55

            Quarter ended December 31, 2001                    1.35         .35
</TABLE>


                                       8
<PAGE>
<TABLE>
<S>                                                          <C>         <C>
       YEAR ENDED DECEMBER 31, 2000

            Period July 3 - September 30                       4.00       .0625

            Period October 2 - December 4                      7.50        4.25

            Period December 5 - December 31                    2.75        1.75
</TABLE>

      On April 3, 2002, the closing bid price of our common stock was $1.10

HOLDERS

      As of April 3, 2002, there were approximately 28 record holders of our
common stock.

DIVIDENDS

      We have never declared any cash dividends with respect to our common
stock. Subject to the prior or equivalent rights, if any, of any series of
preferred stock which may from time to time be outstanding, holders of our
common stock are entitled to receive ratably, dividends when, as, and if
declared by our board of directors out of funds legally available therefor.
Under the Business Corporation Law of New York, we may only pay dividends out of
capital and surplus, or out of certain enumerated retained earnings, as those
terms are defined in the Business Corporation Law of New York. The payment of
dividends on our common stock is, therefore, subject to the availability of
capital and surplus or retained earnings as provided in the Business Corporation
Law of New York.

RECENT SALES OF UNREGISTERED SECURITIES

      During the fiscal year ended December 31, 2001 we sold no unregistered
securities.

                 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this document.
In addition to the information contained herein the following discussion
contains forward looking statements that involve certain risks and uncertainties
which may cause our actual results in future periods to differ materially from
forecasted results. See "Forward Looking Statements" on page 3.

      After deducting operating expenses which consist of postage, printing and
miscellaneous office supplies of approximately $1,000 per trunk show, the
consultants are paid their fees. Since we do not have to pay in advance for any
of the merchandise that we sell, it is not necessary to have large amounts of
cash available. Doncaster pays us a commission of 25% of the net sales Doncaster
receives from our selling efforts. The commission that Doncaster pays to us is
our total revenue from the sales of the Doncaster apparel. The net sales are the
total of all the sales to the customers minus any returns. Most of the money we
receive from Doncaster is paid to our independent contractors in the form of
commissions. The money retained by us is used to offset


                                       9
<PAGE>
part of the expenses incurred by us, with respect to our operation as a direct
seller of the Doncaster line. Subsequent to the period covered by this Report,
we have discontinued our operation as a direct seller of the Doncaster line. See
Item 1 Description of Business - Subsequent Events.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 AS COMPARED TO THE
YEAR ENDED DECEMBER 31, 2000

      Our results of operations for the year ended December 31, 2001 were
similar to our results for the year ended December 31, 2000. For the year ended
December 31, 2001, we generated net sales of $17,013 as compared to $17,438 for
the year ended December 31, 2000 representing a decrease of $425. Our cost of
goods sold for the year ended December 31, 2001 was $-0- as compared to $-0- for
the year ended December 31, 2000. Our gross profit on sales was $17,013 for the
year ended December 31, 2001 as compared to $17,438 for the year ended December
31, 2000.

      Our general and administrative costs aggregated to approximately $21,378
for the year ended December 31, 2001 as compared to $26,419 for the year ended
December 31, 2000 representing a decrease of $5,041. Included in the $21,378 are
$16,066 in commissions, and $5,312 in office expenses.

LIQUIDITY AND CAPITAL RESOURCES

      We have incurred losses since the inception of our business as a direct
seller of Doncaster apparel. We expect to continue to incur losses until we
increase our revenues while reducing our general and administrative expenses or
enter into new lines of business through acquisition or otherwise. We have been
dependent on sales of our common stock and loans by our principal shareholders
to conduct operations. As at December 31, 2001 we had an accumulated deficit of
$60,604 compared to an accumulated deficit of $56,239 at December 31, 2000.

      As at December 31, 2001 we had total current assets of $404 and total
current liabilities of $37,568 or a negative working capital of $37,164. At
December 31, 2000 we had total current assets of $4,025 and total current
liabilities of $36,824 or a negative working capital of $32,799.

      The report of our independent accountants on our December 31,2001
financial statements contains an explanatory paragraph regarding our ability to
continue as an ongoing business.

INCOME TAXES

      As of December 31, 2001, we had a tax loss carry-forward of $60,604. Our
ability to utilize the tax credit carry-forwards in future years will be subject
to an annual limitation pursuant to the "Change in Ownership Rules" under
Section 382 of the Internal Revenue Code of 1986, as amended. Any annual
limitations are not expected to have a material adverse effect on our ability to
utilize our tax credit carry-forwards.


                                       10
<PAGE>
                          ITEM 7. FINANCIAL STATEMENTS

      The financial statements and supplementary data are included beginning
immediately following the signature page to this report. See Item 13 for a list
of the financial statements and financial statement schedules included.

              ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE

      None.


                                    PART III

          ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
           PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

      The following table sets forth certain information, as of April 1, 2002,
regarding our executive officers and directors.

      Directors serve until the next annual meeting of the stockholders, until
their successors are elected or appointed and qualified, or until their prior
resignation or removal. Officers serve for such terms as determined by our board
of directors. Each officer holds office until such officer's successor is
elected or appointed and qualified or until such officer's earlier resignation
or removal. No family relationships exist between any of our present directors
and officers.

<TABLE>
<CAPTION>
      Name                      Age        Position
      ----                      ---        --------
<S>                             <C>        <C>
      Henry J. Yersh            64         President & Chief Executive Officer and Director
      Denis St. Hilaire         61         Chief Financial Officer and Director
</TABLE>

      The following is a brief account of the business experience of each of our
directors and executive officers during the past five years or more.

      Henry Yersh, President and Chief Executive Officer and a Director, is
President and Chief Executive Officer of Gicco Investment Corp. a small venture
capital investment firm investing primarily in biotechnology and high tech
start-up companies since 1981. From 1981 to 1997, he was President of General
Interior Cleaning Corp., a janitorial contracting company specializing in
cleaning services. From 1964 to 1975, he was President of Nationwide Interior
Cleaning Co. Ltd., a janitorial contracting company specializing in cleaning
services. From 1967 to 1975, he was President of Nimco Ltd. 1967-1975 a
subsidiary of Nationwide, solely responsible for the janitorial and maintenance
operations of Man and His World, formerly known as EXPO 67.

      Denis St. Hilaire, Chief Financial Officer and a Director, has been a
self-employed businessman since 1987. Mr. St. Hilaire has performed various
administrative functions for several Canadian public companies. He was
instrumental in structuring the financial sector of the


                                       11
<PAGE>
companies and assisting the search for new equity capital. From 1962 to 1987, he
was District Manager of Dun & Bradstreet, a worldwide provider of business
information, where he was responsible for overseeing and maintaining all house
accounts and all new accounts of major Canadian corporations.

BOARD OF DIRECTORS

      Our directors receive no remuneration for acting as such. Directors may
however be reimbursed their expenses, if any, for attendance at meetings of the
Board of Directors. Our Board of Directors may designate from among its members
an executive committee and one or more other committees. No such committees have
been appointed to date.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

      To the best of our knowledge, during the fiscal year ended December 31,
2001, all Section 16(a) filing requirements applicable to our officers,
directors and greater than 10% beneficial owners were satisfied, although Form
5's were filed on a late basis, during February 2002, for each of Henry Yersh,
Denis St. Hilaire, and Group Intercapital Inc.

                         ITEM 10. EXECUTIVE COMPENSATION

      The following table sets forth information concerning the total
compensation paid or accrued by us during the three fiscal years ended December
31, 2001 to (i) all individuals that served as our chief executive officer or
acted in a similar capacity for us at any time during the fiscal year ended
December 31, 2001 and (ii) all individuals that served as executive officers of
ours at any time during the fiscal year ended December 31, 2001 that received
annual compensation during the fiscal year ended December 31, 2000 in excess of
$100,000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                     Annual Compensation                          Long-Term Compensation
                          ------------------------------------------  ---------------------------------------------
                          Fiscal Year
Name and                     Ended                          Other     Options/   Restricted    LTIP     All Other
Principal Position        December 31,   Salary  Bonus  Compensation    SARs    Stock Awards  Payouts  Compensation
------------------        ------------   ------  -----  ------------    ----    ------------  -------  ------------
<S>                       <C>           <C>      <C>    <C>           <C>       <C>           <C>      <C>
Henry J. Yersh,               2001      $     0    0          0          0           0           0          0
Chief Executive Officer,      2000      $ 2,000    0          0          0           0           0          0
President (1)                 1999      $     0    0          0          0           0           0          0
</TABLE>

----------

(1)   Mr. Yersh has served as our president and chief executive officer since
      August 28, 2000.

OPTION/SAR GRANTS IN LAST FISCAL YEAR; AGGREGATED OPTION/SAR EXERCISES AND
FISCAL YEAR END OPTION/SAR VALUES

      We did not issue any stock options or stock appreciation rights during the
fiscal year ended December 31, 2001 and have not issued any stock options or
stock appreciation rights since our inception.

STOCK OPTION PLANS

      We do not have any stock option plans.


                                       12
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS

      We made no long-term incentive plan awards to the named executive officer
during the fiscal year ended December 31, 2001, and have made no long-term
incentive plan awards since our inception.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS

      We have no employment agreements, compensation plans or arrangements with
respect to the named executive officer which would in any way result in payments
being made to such executive officer because of his resignation, retirement or
other termination of employment with us, or because of any change in control or
a change in such executive officer's responsibilities following a change in
control.

                     ITEM 11. SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth information with respect to the beneficial
ownership of our common stock known by us as of March 31, 2002, by (i) each
person or entity known by us to be the beneficial owner of more than 5% of our
common stock, (ii) each of our directors, (iii) each of our executive officers,
and (iv) all of our directors and executive officers as a group. The persons
listed below have sole voting and investment power with respect to all shares of
our common stock owned by them, except to the extent such power may be shared
with a spouse.

<TABLE>
<CAPTION>
                                        SHARES OF COMMON STOCK    PERCENTAGE
     NAME AND ADDRESS OF OWNER            BENEFICIALLY OWNED     OWNERSHIP(2)
     -------------------------            ------------------     ------------
<S>                                     <C>                      <C>
Group Intercapital, Inc. (1)               5,205,000 shares         55.49%
300 St. Sacrement, Suite 414
Montreal, Quebec
Canada H2Y 1X4

Henry J. Yersh                                     0 shares             0%
101 Chartwell Crescent
Beaconsfield, Quebec
Canada H9W 1C2

Denis St. Hilaire                                  0 shares             0%
150 Berlioz, #157
Verdun, Quebec
Canada H3E 1K3

All Executive Officers and Directors
as a group (2 persons)                            0 shares              0%
</TABLE>

----------

(1)   Claude Gendron is the owner of Group Intercapital, Inc.

(2)   Based upon 9,380,000 shares of common stock issued and outstanding as at
      March 31,2002.


                                       13
<PAGE>
             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      On August 28, 2000, Group Intercapital Inc., purchased from Paul
Gottbetter, our then president and principal shareholder, 1,735,000 pre split
shares (5,205 post split shares) of our common stock for $100,000. At that time,
such shares represented approximately 55.8% of our common stock. Accordingly,
the sale represented a change in control. Pursuant to the sale, Group
Intercapital Inc. replaced our board of directors with Henry Yersh and Denis St.
Hilaire and appointed Messrs. Yersh and St. Hilaire as our executive offices.

                 ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
Financial Statements                                                         Page
--------------------                                                         ----
<S>                                                                          <C>
Report of Thomas P. Monahan, Independent Certified Public Accountant ......   18

Balance Sheet as of December 31, 2001 .....................................   19

Statements of Operations for the years and three months ended
    December 31, 2001 and 2000 ............................................   20

Statement of Stockholders' Equity for the years ended December 31,
    2001 and 2000 .........................................................   22

Statements of Cash Flows for the years ended December 31,
    2001 and 2000 .........................................................   23

Notes to Financial Statements .............................................   24
</TABLE>

FINANCIAL STATEMENT SCHEDULES

      All financial statement schedules are omitted because they are not
applicable or the required information is shown in the financial statements or
notes thereto.

REPORTS ON FORM 8-K

      No reports on Form 8-K were filed during the quarter ended December 31,
2001.


                                       14
<PAGE>
EXHIBITS

      The following exhibits are included as part of this report:

<TABLE>
<CAPTION>
          EXHIBIT
           NUMBER       TITLE OF DOCUMENT
           ------       -----------------
<S>                     <C>
            3.1         Certificate of Incorporation filed August 13, 1996(1)

            3.2(a)      Certificate of Amendment of the Certificate of
                        Incorporation filed April 7, 1999 (1)

            3.2(b)      Certificate of Amendment of the Certificate of
                        Incorporation filed September 20, 1999 (2)

            3.2(c)      Certificate of Amendment of the Certificate of
                        Incorporation filed November 20, 2000 (3)

            3.2(d)      Certificate of Amendment of the Certificate of
                        Incorporation filed January 29, 2001 (4)

            3.2(e)      Certificate of Amendment of the Certificate of
                        Incorporation filed March 29, 2002

            3.3         By-Laws of Harmony (1)

            10          Fashion Consultant Agreement dated as of December 7,
                        1998, by and between Tanner Companies Limited
                        Partnership and Falene R. Gottbetter (1)

            21          Subsidiaries - None
</TABLE>

----------

(1)   Incorporated by reference to the registration statement on Form 10-SB
      filed July 22, 1999.

(2)   Incorporated by reference to Form 10-QSB for the period ended September
      30, 1999 filed on November 15, 1999.

(3)   Incorporated by reference to Form 8-K filed December 4, 2000.

(4)   Incorporated by reference to Schedule 14C filed on January 5, 2001.


                                       15
<PAGE>
                                   SIGNATURES

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

                                        HARMONY TRADING CORP.

Dated:  April 9, 2002                   By:  /s/Henry J. Yersh
                                             -----------------------------------
                                             Henry J. Yersh
                                             President & Chairman of the Board

      Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 9th day of April, 2002.

                                        By:  /s/Henry J. Yersh
                                             -----------------------------------
                                             Henry J. Yersh
                                             President, Chief Executive Officer
                                             and Chairman of the Board

                                        By:  /s/Denis St. Hilaire
                                             -----------------------------------
                                             Denis St. Hilaire
                                             Chief Financial and Accounting
                                             Officer, and Director


                                       16
<PAGE>
EXHIBIT INDEX:

<TABLE>
<CAPTION>
    EXHIBIT
     NUMBER       ITEM                                                        PAGE
     ------       ----                                                        ----
<S>               <C>                                                         <C>
      3.1         Certificate of Incorporation filed August 13, 1996(1)

      3.2(a)      Certificate of Amendment of the Certificate of
                  Incorporation filed April 7, 1999 (1)

      3.2(b)      Certificate of Amendment of the Certificate of
                  Incorporation filed September 20, 1999 (2)

      3.2(c)      Certificate of Amendment of the Certificate of
                  Incorporation filed November 20, 2000 (3)

      3.2(d)      Certificate of Amendment of the Certificate of
                  Incorporation filed January 29, 2001 (4)

      3.2(e)      Certificate of Amendment of the Certificate of
                  Incorporation filed March 29, 2002                           29

      3.3         By-Laws of Harmony (1)

      10          Fashion Consultant Agreement dated as of December 7,
                  1998, by and between Tanner Companies Limited
                  Partnership and Falene R. Gottbetter (1)

      21          Subsidiaries - None
</TABLE>

----------

(1)   Incorporated by reference to the registration statement on Form 10-SB
      filed July 22, 1999.

(2)   Incorporated by reference to Form 10-QSB for the period ended September
      30, 1999 filed on November 15, 1999.

(3)   Incorporated by reference to Form 8-K filed December 4, 2000.

(4)   Incorporated by reference to Schedule 14C filed on January 5, 2001.


                                       17
<PAGE>
                                THOMAS P. MONAHAN
                           CERTIFIED PUBLIC ACCOUNTANT
                              208 LEXINGTON AVENUE
                           PATERSON, NEW JERSEY 07502
                              PHONE: (973) 790-8775
                               FAX (973) 790-8845


To       THE BOARD OF DIRECTORS AND SHAREHOLDERS
         OF HARMONY TRADING CORP. (A DEVELOPMENT STAGE COMPANY)

         I have audited the accompanying balance sheet of Harmony Trading Corp.
(a development stage company) as of December 31, 2001 and the related statements
of operations, cash flows and shareholders' equity for the years ended December
31, 2001 and for the period from inception, August 13, 1996, to December 31,
2001. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.

         I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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 and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

         In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Harmony Trading
Corp. (a development stage company) as of December 31, 2001 and the results of
its operations, shareholders equity and cash flows for the year ended December
31, 2001 and for the period from inception, August 13, 1996, to December 31,
2001 in conformity with generally accepted accounting principles.

         The accompanying financial statements have been prepared assuming that
Harmony Trading Corp. (a development stage company) will continue as a going
concern. As more fully described in Note 2, the Company has incurred operating
losses since the date of inception and requires additional capital to continue
operations. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans as to these matters are
described in Note 2. The financial statements do not include any adjustments to
reflect the possible effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may result from the
possible inability of Harmony Trading Corp. (a development stage company) to
continue as a going concern.



                                        /s/ Thomas Monahan
                                        --------------------------
                                            Thomas P. Monahan, CPA
January 27, 2002
Paterson, New Jersey


                                       18
<PAGE>


                              HARMONY TRADING CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                                  BALANCE SHEET

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                                         2001
                                                     ------------
<S>                                                  <C>
          Assets

Current assets
  Cash and cash equivalents                          $        404
                                                     ------------
  Current assets                                     $        404

Property and equipment                                         -0-

Total assets                                         $        404
                                                     ============

          Liabilities and Stockholders' Equity

Current liabilities
  Accounts payable and accrued expenses              $     37,568
                                                     ------------
  Total current liabilities                          $     37,568

          Stockholders' equity

  Preferred stock authorized 5,000,000 shares,
   $0.001 par value each. At December 31, 2001
   there are -0- shares outstanding.

  Common Stock authorized 200,000,000 shares,
  $0.000333 par value each.  At December 31, 2001,
  there are 9,330,000 shares outstanding                    3,107

Additional paid in capital                                 20,333
Deficit accumulated during development stage              (60,604)
                                                     ------------
Total stockholders' equity                                (37,164)
                                                     ------------
Total liabilities and stockholders' equity           $        404
                                                     ============
</TABLE>


                 See accompanying notes to financial statements.


                                       19
<PAGE>


                              HARMONY TRADING CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                             STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                  For the period
                                    For the         For the       from inception
                                   year ended      year ended     August 13, 1996
                                   December 31,    December 31,    to December 31,
                                      2000            2001              2001
                                   ---------       ---------      ----------------
<S>                                <C>             <C>            <C>
Revenue                            $  17,438       $  17,013      $         54,369

Costs of goods sold                       -0-             -0-                   -0-
                                   ---------       ---------      ----------------

Gross profit                          17,438          17,013                54,369

Operations:
  General and administrative          26,419          21,378               115,245

  Depreciation and amortization           -0-             -0-                   -0-
                                   ---------       ---------      ----------------
  Total expense                       26,419          21,378               115,245

Income (loss) from Operations         (8,981)         (4,365)              (60,876)

Other income
   Interest income                                                             272
                                                                  ----------------

Total Other Income
Income (loss)                      $  (8,981)      $  (4,365)     $        (60,604)
                                   =========       =========      ================


Net income (loss)
  per share - basic                    (0.00)          (0.00)

Number of shares
 outstanding-  basic               9,330,000       9,330,000
                                   =========       =========
</TABLE>

                 See accompanying notes to financial statements.


                                       20
<PAGE>


                              HARMONY TRADING CORP.

                          (A DEVELOPMENT STAGE COMPANY)

                             STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                        For the          For the
                                     three months     three months
                                     December 31,     December 31,
                                         2000             2001
                                     ------------     ------------
<S>                                  <C>              <C>
Revenue                              $      2,213     $      1,891

Costs of goods sold                            -0-              -0-
                                     ------------     ------------
Gross profit                                2,213            1,891

Operations:
  General and Administrative                4,844            5,602

  Depreciation and amortization                -0-              -0-
                                     ------------     ------------
  Total expense                             4,844            5,602

Income (loss) from Operations              (2,631)          (3,711)

Other income
  Interest income
Total Other Income
Income (loss)                        $     (2,631)    $     (3,711)
                                     ============     ============

Net income (loss)
  per share - basic                         (0.00)           (0.00)
Number of shares
  outstanding-  basic                   9,330,000        9,330,000
                                     ============     ============
</TABLE>


                 See accompanying notes to financial statements.


                                       21
<PAGE>


                              HARMONY TRADING CORP.

                          (A DEVELOPMENT STAGE COMPANY)

                        STATEMENT OF STOCKHOLDERS EQUITY

<TABLE>
<CAPTION>
                                                                               Deficit
                                                                             accumulated
                                                              Additional        during
                             Common           Common           paid in       development
     Date                    Stock             Stock           Capital          stage            Total
                           -----------      -----------      -----------    ------------      -----------
<S>                          <C>            <C>              <C>            <C>              <C>
December 31, 1996
balance (1)                  6,000,000      $     1,998      $         2                      $     2,000

Net income                                                                   $   (10,865)     $   (10,865)
                           -----------      -----------      -----------     -----------      -----------

December 31, 1997
balance                      6,000,000            1,998      $         2     $   (10,865)     $    (8,865)

Net loss                                                                         (10,785)         (10,785)
                           -----------      -----------      -----------     -----------      -----------

December 31, 1998
balance                      6,000,000            1,998      $         2    ($    21,650)         (19,650)

Sale of shares               3,030,000            1,009           24,241                           25,250

Contribution of
 services                                                            375                              375

Issuance of shares
 for legal services            300,000              100            2,400                            2,500

Less offering expenses                                            (6,685)                          (6,685)

Net Loss                                                                         (25,608)         (25,608)
                           -----------      -----------      -----------     -----------      -----------

December 31, 1999
 balance                     9,330,000      $     3,107      $    20,333     $   (47,258)     $   (23,818)

Net loss                                                                          (8,981)          (8,981)
                           -----------      -----------      -----------     -----------      -----------
Balances
December 31, 2000            9,330,000      $     3,107      $    20,333         (56,239)     $   (32,799)

Net loss                                                                          (4,365)          (4,365)
                           -----------      -----------      -----------     -----------      -----------
Balances
December 31, 2001            9,330,000      $     3,107      $    20,333     $   (60,604)     $   (37,164)
                           ===========      ===========      ===========     ===========      ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       22
<PAGE>


                              HARMONY TRADING CORP.

                          (A DEVELOPMENT STAGE COMPANY)

                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 For the period
                                    For the         For the      from inception
                                   year ended     year ended     August 13, 1996
                                   December 31,   December 31,   to December 31,
                                      2000           2001              2001
                                   -----------    -----------    ----------------
<S>                                <C>            <C>            <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
  Net income (loss)                $    (8,981)   $    (4,365)   $        (60,604)
  Non cash transaction                                                      4,875

  Accounts payable and accrued
    accrued expenses                     9,824            744              37,568
                                   -----------    -----------    ----------------
TOTAL CASH FLOWS FROM
  OPERATIONS                               843         (3,621)            (18,161)



TOTAL CASH FLOWS FROM
INVESTING ACTIVITIES                        -0-            -0-                 -0-


CASH FLOWS FROM FINANCING
ACTIVITIES

  Sale of stock net of
   offering expenses                                                       18,565
                                                                 ----------------
TOTAL CASH FLOWS FROM
  FINANCING ACTIVITIES                                                     18,565

NET INCREASE (DECREASE) IN CASH            843         (3,621)   $             -0-
CASH BALANCE BEGINNING OF PERIOD         3,182          4,025                  -0-
                                   -----------    -----------    ----------------
CASH BALANCE END OF PERIOD         $     4,025    $       404    $            404

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:

Cash paid for interest             $        -0-   $        -0-   $             -0-
Cash paid for income taxes         $        -0-   $        -0-   $            325
                                   ===========    ===========    ================
</TABLE>


                 See accompanying notes to financial statements.


                                       23
<PAGE>


                              HARMONY TRADING CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


NOTE 1   -    ORGANIZATION OF COMPANY AND ISSUANCE OF COMMON STOCK

         a.   CREATION OF THE COMPANY

         Harmony Trading Corp., (the "Company") was formed under the laws of New
York on August 13, 1996 and was originally authorized to issue 200 shares of
common stock, without par value each. On April 6, 1999, the Company amended its
certificate of incorporation increasing the authorized number of shares of
common stock to 20,000,000, $0.001 par value each and increasing the authorized
number of shares of preferred stock to 5,000,000, $0.001 par value. each. On
November 20, 2000, the Company amended its certificate of incorporation
increasing the authorized number of shares of common stock to 200,000,000,
$0.000333 par value each.

         b.   DESCRIPTION OF THE COMPANY

         The Company is considered to be a development stage business that is in
the business of the direct selling of women's apparel and accessories through
personal appointments and fashion shows.

NOTE 2   -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         a.   BASIS OF FINANCIAL STATEMENT PRESENTATION

         The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $60,604 for the period from inception, August 13, 1996, to December 31, 2001.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to have positive cash flows from operations. The
Company's future capital requirements will depend on numerous factors including,
but not limited to, continued progress in its selling capabilities and
implementing its marketing strategies. The Company plans to engage in such
ongoing financing efforts on a continuing basis.

         The financial statements presented consist of the balance sheet of the
Company as at December 31, 2001 and the related statements of operations and
cash flows and stockholders' equity for the years ending December 31, 2000 and
2001, and for the period from inception, August 13, 1996, to December 31, 2001.

         b.   CASH AND CASH EQUIVALENTS

         The Company treats temporary investments with a maturity of less than
three months as cash.


                                       24


<PAGE>
                              HARMONY TRADING CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


         c.   REVENUE RECOGNITION

         Revenue is recognized when products are shipped or services are
rendered. Commission income is recognized when products are shipped or services
are rendered.

         d.   SELLING AND MARKETING COSTS

         Selling and Marketing - Certain selling and marketing costs are
expensed in the period in which the cost pertains. Other selling and marketing
costs are expensed as incurred.

         e.   USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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.

         f.   SIGNIFICANT CONCENTRATION OF CREDIT RISK

         At December 31, 2001, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.

         g.   ASSET IMPAIRMENT

         The Company adopted the provisions of SFAS No. 121, Accounting for the
impairment of long lived assets and for long-lived assets to be disposed of
effective January 1, 1996. SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the estimated undiscounted cash flows to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. There
was no effect of such adoption on the Company's financial position or results of
operations.

         h.   PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed over the estimated useful lives using the
straight line methods over a period of seven years. Maintenance and repairs are
charged against operations and betterment's are capitalized.


                                       25
<PAGE>
                              HARMONY TRADING CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


NOTE 3   -    RELATED PARTY TRANSACTIONS

         a.   OFFICE LOCATION

         The Company occupies office space at 300 St. Sacrement, Suite 414,
Montreal, Quebec, Canada, the executive offices of our controlling stockholder,
Group Intercapital Inc.

         b.   CHANGE IN MANAGEMENT

         During fiscal year 2000, Group Intercapital, Inc., a venture capital
firm, purchased from Paul Gottbetter in a private transaction for $100,000,
1,735,000 shares of common stock, which is approximately 55.8% of the
outstanding common stock, thereby acquiring control of the Company. The source
of funds to purchase the securities was from Group Intercapital's working
capital.

         Group Intercapital replaced our board of directors by appointing Henry
J. Yersh and Denis St. Hilaire. Mr. Yersh was also appointed as President and
Chief Executive Officer and Mr. St. Hilaire was appointed as our Chief Financial
Officer.

NOTE 4   -    COMMITMENTS AND CONTINGENCIES

         At December 31, 2001, the Company has not entered into any contracts or
commitments.

NOTE 5   -    INCOME TAXES

         The Company provides for the tax effects of transactions reported in
the financial statements. The provision if any, consists of taxes currently due
plus deferred taxes related primarily to differences between the basis of assets
and liabilities for financial and income tax reporting. The deferred tax assets
and liabilities, if any represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 2001, the Company had
no material current tax liability, deferred tax assets, or liabilities to impact
on the Company's financial position because the deferred tax asset related to
the Company's net operating loss carryforward and was fully offset by a
valuation allowance.

         At The Company has adopted and there was no impact on operating results
or financial position, the Company has net operating loss carry forwards for
income tax purposes of $60,604 This carryforward is available to offset future
taxable income, if any, and expires in the year 2010. The Company's utilization
of this carryforward against future taxable income may become subject to an
annual limitation due to a cumulative change in ownership of the Company of more
than 50 percent.


                                       26
<PAGE>
                              HARMONY TRADING CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


         The components of the net deferred tax asset as of The Company has
adopted and there was no impact on operating results or financial position are
as follows:

<TABLE>
<S>                                                        <C>
         DEFERRED TAX ASSET:
              Net operating loss carry forward             $   20,605
              Valuation allowance                          $  (20,605)
                                                           ----------
              Net deferred tax asset                       $       -0-
                                                           ==========
</TABLE>

         The Company recognized no income tax benefit for the loss generated in
the period from inception, August 13, 1996, to December 31, 2001.

         SFAS No. 109 requires that a valuation allowance be provided if it is
more likely than not that some portion or all of a deferred tax asset will not
be realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income.

         Because the Company has yet to recognize significant revenue from the
sale of its products, the Company believes that a full valuation allowance
should be provided.

NOTE 6   -    PREFERRED STOCK

         The Company's authorized preferred stock consists of 5,000,000 Shares
of Preferred Stock, par value $.001 per share.

         The Board of Directors of the Company has the authority to establish
and designate any shares of stock in series or classes and to fix any variations
in the designations, relative rights, preferences and limitations between series
as it deems appropriate, by a majority vote.

         The preferred stock may be issued in series, each of which may vary, as
determined by the board of directors, as to the designation and number of shares
in such series, voting power of the holders thereof, dividend rate, redemption
terms and prices, voluntary and involuntary liquidation preferences, and
conversion rights and sinking fund requirements, if any, of such series.

         As of December 31, 2001, the number of shares of preferred stock
outstanding is -0-.

NOTE 7   -    BUSINESS AND CREDIT CONCENTRATIONS

         The amount reported in the financial statements for cash approximates
fair market value. Because the difference between cost and the lower of cost or
market is immaterial, no adjustment has been recognized and investments are
recorded at cost.


                                       27
<PAGE>


                              HARMONY TRADING CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


         Financial instruments that potentially subject the company to credit
risk consist principally of trade receivables. Collateral is generally not
required.


                                       28