Surge Global Energy, Inc. – ‘424A’ on 5/1/98

As of:  Friday, 5/1/98   ·   Accession #:  1047469-98-17744   ·   File #:  333-45863

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Prospectus   —   Rule 424(a)
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 1: 424A        Prospectus                                            82    468K 

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A           
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE     
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY    
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES  
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE         
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES 
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR  
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.   

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                                                AS FILED PURSUANT TO RULE 424(A)
                                                      REGISTRATION NO. 333-45863
PRELIMINARY PROSPECTUS DATED MAY 1, 1998

PROSPECTUS                                                                      

    THE HAVANA GROUP, INC.
460,000 UNITS 

EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK 
AND TWO CLASS A COMMON STOCK PURCHASE WARRANTS
--------------------- 

 The Havana Group, Inc. (the "Company") is offering for sale 460,000 units
(the "Units"), each Unit consisting of one share of common stock, $.001 par     
value (the "Common Stock") and two redeemable Class A Common Stock Purchase     
Warrants (the "Class A Warrants") (the "Offering"). The Common Stock and the    
Class A Warrants are not detachable or separately transferable until the earlier
of (i)       , 1998 (six months from the date of this Prospectus) or (ii) the   
date selected by the Representative (as defined herein) in writing for          
separation (the "Separation Date"). After the Separation Date, the Common Stock 
and Class A Warrants will be detachable and may trade separately. Each Class A  
Warrant entitles the holder to purchase one share of Common Stock at a price of 
$5.25 and are exercisable from the Separation Date until five years after the   
date of this Prospectus. The Company may redeem the Class A Warrants at a price 
of $.10 per Warrant, at any time after one year from the date of this           
Prospectus, 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 within 15 days prior to the date on which the notice of     
redemption is given. See "Description of Securities."                           
                                                           (CONTINUED ON PAGE 3)

AN INVESTMENT IN THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND     
IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN 
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE
11 AND "DILUTION" BEGINNING ON PAGE 25.                                         
--------------------- 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE    
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE     
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY    
REPRESENTATION TO THE CONTRARY IS A CRIMINAL      
OFFENSE.

                                                        [Enlarge/Download Table]

                                                  UNDERWRITING                PROCEEDS 
                                       PRICE       DISCOUNTS      PROCEEDS   TO SELLING
                                         TO           AND            TO         UNIT   
                                       PUBLIC    COMMISSIONS(1)  COMPANY(2)    HOLDER  
                                                                                       
Per Unit............................   $6.00         $0.60         $5.40       $5.40   
Total(3)............................ $2,760,000     $276,000     $2,484,000     $-0-   

(1) Does not include additional compensation to be received by the Underwriters 
    in the form of a non-accountable expense allowance equal to 3% of the public
offering price of the Units, the value of an option granted to the      
 Underwriters to purchase up to 46,000 Units at an exercise price of $9.00
per Unit ("Underwriters' Unit Purchase Option"), or a two-year financial
consulting agreement with the Representative at a cost to the Company of
   $100,000 payable in advance at the Closing of the Offering. The Company has
also agreed to indemnify the Underwriters against certain liabilities,  
including liabilities under the Securities Act of 1933, as amended. See 
"Underwriting."                                                         

(2) Before deducting expenses of the Offering payable by the Company, estimated 
  at approximately $434,000, including the non-accountable expense allowance
    in the amount of $82,800 ($95,220 if the Underwriters' Over-Allotment option
  is exercised in full), and the financial consulting fee referred to above.
After deducting such expenses, the net proceeds to the Company will be  
approximately $2,050,000 (approximately $2,037,500 if the Underwriters' 
Over-Allotment Option is exercised in full). See "Use of Proceeds."     

(3) Duncan Hill, Inc., the Company's sole stockholder (the "Selling Unit        
   Holder") has granted the Underwriters an option, exercisable within 30 days
    from the date of this Prospectus, to purchase up to 69,000 additional Units,
 solely to cover Over-Allotments, if any (the "Over-Allotment Option"). If
   such Over-Allotment Option is exercised in full, the total Price to Public,
   Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to
Selling Unit Holder will be approximately $3,174,000 and $317,400,      
$2,484,000, and $372,600, respectively. See "Use of Proceeds" and       
"Underwriting."                                                         
------------------------
VTR CAPITAL, INC. 

The date of this Prospectus is May   , 1998.

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 1998. 

                                                      REGISTRATION NO. 333-45863
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO 2

TO

FORM SB-2 
REGISTRATION STATEMENT
UNDER 
THE SECURITIES ACT OF 1933
------------------------

THE HAVANA GROUP, INC.
(Name of small business issuer in its charter)

                                                                [Download Table]
                                                                               
          DELAWARE                          5999                  34-1454529   
(State or other jurisdiction    (Primary Standard Industrial   (I.R.S. Employer
             of                   Classification Code No.)      Identification 
       organization)                                                 No.)      

4450 BELDEN VILLAGE STREET, N.W., SUITE 406 
CANTON, OHIO 44718
(330) 492-8090
(330) 492-8290/FACSIMILE
(Address and telephone number of principal executive offices and
principal place of business.) 

WILLIAM L. MILLER, CHIEF EXECUTIVE OFFICER
THE HAVANA GROUP, INC.
4450 BELDEN VILLAGE STREET, N.W., SUITE 406 
CANTON, OHIO 44718
(330) 492-8090
(330) 492-8290/FACSIMILE
(Name, address and telephone number of agent for service) 
------------------------

COPIES TO:

STEVEN MORSE, ESQ.                        STEVEN GOLD, ESQ. 
LESTER MORSE P.C.                         MINTZ & GOLD, LLP 
    SUITE 420                            444 PARK AVE. SOUTH
111 GREAT NECK ROAD                        NEW YORK, NY 10016 
GREAT NECK, NY 11021                     PHONE: (212) 696-4848
PHONE: (516) 487-1446                      FAX: (212) 696-1231  
FAX: (516) 487-1452                                           

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
------------------------

As soon as practicable after the effective date of this Registration    
Statement. If any of the securities being registered on this Form are to be     
offered on a delayed or continuous basis, pursuant to Rule 415 under the        
Securities Act of 1933, check the following box: /X/                            

If this Form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier        
effective registration statement for the same offering: / /                     

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering: / /                                                      

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF  
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME     
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), 
MAY DETERMINE.                                                                  

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

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  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /                                             
------------------------

CALCULATION OF REGISTRATION FEE 

                                                        [Enlarge/Download Table]

                                                      PROPOSED MAXIMUM    PROPOSED MAXIMUM                    
      TITLE OF EACH CLASS OF          AMOUNT TO        OFFERING PRICE        AGGREGATE          AMOUNT OF     
   SECURITIES BEING REGISTERED      BE REGISTERED         PER UNIT       OFFERING PRICE (1)  REGISTRATION FEE 
                                                                                                              
Units, each consisting of one                                                                                 
  share of Common Stock, $.001 par                                                                            
  value per share, and two Class A                                                                            
  Warrants each to purchase one                                                                               
  share of Common Stock (2).......           529,000              $6.00          $3,174,000            $936.33
Shares of Common Stock included in                                                                            
  the Units.......................           529,000                 --                  --              --(4)
Class A Warrants included in the                                                                              
  Units...........................           058,000                 --                  --              --(4)
Shares of Common Stock underlying                                                                             
  Class A Warrants (3)............         1,058,000              $5.25          $5,554,500           1,638.57
Underwriters' Warrant Purchase                                                                                
  Option ("Underwriters'                                                                                      
  Option")........................            46,000              $.001                 $46                .01
Units to purchase one share of                                                                                
  Common Stock and two Class A                                                                                
  Warrants each to purchase one                                                                               
  share of Common Stock in                                                                                    
  Underwriters' Option to be                                                                                  
  purchased from a Selling Unit                                                                               
  Holder..........................            46,000              $9.00            $414,000             122.13
Class A Warrants to purchase one                                                                              
  share of Common Stock in                                                                                    
  Underwriters' Option............            92,000                 --                  --              --(4)
Shares of Common Stock included in                                                                            
  Underwriters' Option (4)........            46,000                 --                  --              --(4)
Shares of Common Stock underlying                                                                             
  Class A Warrants included in the                                                                            
  Underwriters' Option (5)........            92,000             $7,875            $724,500             213.74
Common Stock of Selling Security                                                                              
  Holders.........................           400,000              $6.00          $2,400,000             708.00
Class A Warrants of Selling                                                                                   
  Security Holders................         1,600,000                 --                  --              --(4)
Shares of Common Stock underlying                                                                             
  Class A Warrants of Selling                                                                                 
  Security Holders................         1,600,000              $5.25          $8,400,000              2,478
Total Registration Fee(6).........                                                                   $6,096.78

(1) Estimated solely for purposes of determining the registration fee pursuant  
to Rule 457 under the Securities Act of 1933.                           

(2) Includes 69,000 Units which the Underwriters have the option to purchase    
from a Selling Unit Holder to cover Over-Allotments, if any.            

(3) Issuable upon the exercise of Class A Warrants to be offered to the public. 

(4) No fee is required under Rule 457(g).                                       

(5) Issuable upon the exercise of the Class A Warrants included in the 46,000   
Units included in the Underwriters' Option.                             

(6) $6,096.78 previously paid                                                   

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EXPLANATORY NOTE

    This Registration Statement covers the primary offering of securities of The
Havana Group, Inc. (the "Company") and up to 69,000 Units to be sold by Duncan  
Hill, Inc. ("Selling Unit Holder") pursuant to the Underwriters' Over-Allotment 
Option and the offering of other securities by certain persons, each as a       
selling security holder (the "Selling Security Holders"). The Company is        
registering, under the primary prospectus (the "Primary Prospectus"), 529,000   
Units, each Unit consisting of one share of Common Stock and two Class A        
Warrants. The Company is registering on behalf of a bridge lender as a Selling  
Security Holder under an alternate prospectus (the "Alternate Prospectus"), the 
resale of 400,000 shares of Common Stock and 1,400,000 Class A Warrants issuable
by the Company to the Selling Security Holder upon the completion of the        
Offering pursuant to a Convertible Note which provides for the automatic        
conversion of the Convertible Note and the exercise of such 1,400,000 Class A   
Warrants by the transferees of the bridge lender. The Alternate Prospectus also 
covers the resale of 200,000 Class A Warrants owned by William Miller, the      
Company's Chief Executive Officer, and the exercise of the 200,000 Class A      
Warrants by the transferees of Mr. Miller. The 200,000 Class A Warrants are     
issuable by the Company pursuant to Warrants which provide for the automatic    
conversion of the Warrants into Class A Warrants upon the completion of the     
Offering. In the event that the Underwriters' Over-Allotment Option is not      
exercised in full, the Alternate Prospectus will also cover the resale of any   
unsold Units up to 69,000 Units and the issuance of such shares of Common Stock 
underlying the exercise of the Class A Warrants included in the Units. The      
Alternate Prospectus pages which follow the Primary Prospectus, contain certain 
sections which are to be combined with all of the sections contained in the     
Primary Prospectus, with the following exceptions; the front cover page and the 
pages which precede "Available Information," the back cover page and the        
sections entitled "Underwriting" and "Selling Security Holders." In addition,   
the section entitled "Concurrent Sales" and "Plan of Distribution" from the     
Alternate Prospectus pages will be added to the Alternate Prospectus. The       
section entitled "Use of Proceeds" in the primary Prospectus will be changed to 
read "Use of Proceeds of Company Offering." Furthermore, all references         
contained in the Alternate Prospectus to "the Offering" shall refer to the      
Company's offering under the Primary Prospectus and all references to the       
"Concurrent Offering" shall refer to the Selling Security Holders Offering in   
the Alternate Prospectus.                                                       

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THE HAVANA GROUP, INC.
CROSS-REFERENCE SHEET 
SHOWING LOCATION IN PROSPECTUS OF 
INFORMATION REQUIRED BY ITEMS IN PART I OF FORM SB-2

                                                        [Enlarge/Download Table]

         REGISTRATION STATEMENT ITEM NUMBER AND CAPTION                          LOCATION IN PROSPECTUS                
----------------------------------------------------------------  -----------------------------------------------------
                                                                                                                       
       1.  Front of Registration Statement and Outside Front                                                           
             Cover Page of Prospectus...........................  Outside Front Cover of Prospectus                    
       2.  Inside Front and Outside Bank Cover Pages of                                                                
             Prospectus.........................................  Inside Front and Outside Bank Cover Pages of         
                                                                    Prospectus; Additional Information                 
       3.  Summary Information and Risk Factors.................  Prospectus Summary; Risk Factors                     
       4.  Use of Proceeds......................................  Use of Proceeds                                      
       5.  Determination of Offering Price......................  Outside Front Cover Page of Prospectus; Underwriting 
       6.  Dilution.............................................  Dilution                                             
       7.  Selling Security holders.............................  Selling Security Holders                             
       8.  Plan of Distribution.................................  Outside Front Cover Page of Prospectus; Selling      
                                                                    Security Holders; Underwriting                     
       9.  Legal Proceedings....................................  Business--Legal Proceedings                          
      10.  Directors, Executive Officers, Promoters and Control                                                        
             Persons............................................  Management                                           
      11.  Security Ownership of Certain Beneficial Owners and                                                         
             Management.........................................  Principal and Selling Stockholders                   
      12.  Description of Securities............................  Description of Securities; Dividends                 
      13.  Interest of Named Experts and Counsel................  Experts and Legal Matters                            
      14.  Disclosure of Commission Position on Indemnification                                                        
             for Securities Act Liabilities.....................  Underwriting                                         
      15.  Organization Within Last Five Years..................  The Company and its Parent                           
      16.  Description of Business..............................  Prospectus Summary; The Company and its Parent;      
                                                                    Business                                           
      17.  Management's Discussion and Analysis or Plan of                                                             
             Operation..........................................  Management's Discussion and Analysis of Financial    
                                                                    Condition and Results of Operations                
      18.  Description of Property..............................  Business                                             
      18.  Certain Relationships and Related Transactions.......  Certain Transactions                                 
      19.  Market for Common Equity and Related Stockholder                                                            
             Matters............................................  Risk Factors; Unregistered Shares Eligible for       
                                                                    Immediate and Future Sale; Description of          
                                                                    Securities                                         
      21.  Executive Compensation...............................  Management--Executive Compensation                   
      22.  Financial Statements.................................  Financial Statements                                 
      23.  Changes in and Disagreements with Accountants on                                                            
             Accounting and Financial Disclosure................  Not Applicable                                       

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INSERT COLOR PHOTOS                                                             

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The Registration Statement of which this Prospectus forms a part also   
includes an Alternate Prospectus that covers a "Concurrent Offering" by certain 
Selling Security Holders (as defined below). The Concurrent Offering includes an
offering of 400,000 shares of Common Stock and 1,400,000 Class A Warrants owned 
by a bridge lender (the "Bridge Lender") and the exercise of the Common Stock   
underlying the 1,400,000 Class A Warrants by the transferees of the bridge      
lender. The Alternate Prospectus also covers the resale of 200,000 Class A      
Warrants owned by William L. Miller ("Miller"), the Company's Chief Executive   
Officer and the exercise of such 200,000 Class A Warrants by the transferees of 
Mr. Miller. In addition to the foregoing, the Alternate Prospectus includes up  
to 69,000 Units (identical to those sold in the Offering) to be offered by      
Duncan Hill, Inc., the Company's sole stockholder (the "Selling Unit Holder" or 
"Duncan Hill") prior to the Offering and the exercise of the Common Stock       
underlying the 138,000 Class A Warrants by the transferees of the Selling Unit  
Holder. To the extent that the Underwriters exercise the Over-Allotment Option  
as described herein, then the number of Units to be offered by the Selling Unit 
Holder in the Concurrent Offering will be proportionately reduced. (The Bridge  
Lender, Miller, and the Selling Unit Holder are hereinafter collectively        
referred to as the "Selling Security Holders.") The securities offered as part  
of the Concurrent Offering may be sold concurrently with or after the Offering. 
The Class A Warrants held by the Selling Security Holders are identical to the  
Class A Warrants being offered by the Company. Sales of such securities or even 
the potential of such sales at any time may have an adverse effect on the market
prices of the securities offered hereby. See "Certain Transactions," "Selling   
Security Holders" and "Risk Factors--Potential Adverse Effect of Redemption or  
Exercise of Class A Warrants."                                                  

Prior to the Offering, there has been no public market for the Units and
there can be no assurance that any such market will develop. VTR Capital, Inc.  
will act as the representative of the Underwriters named herein (the            
"Representative"). For information regarding the factors considered in          
determining the initial public offering price of the Units and the exercise     
price of the Warrants, see "Underwriting." The Units, Common Stock and Warrants 
are expected to be approved for quotation on the Over-the-Counter ("OTC")       
Electronic Bulletin Board under the symbols "      ," "      ," and "      ,"   
respectively. See "Risk Factors--Certain Implications of Trading                
Over-The-Counter; "Penny Stock Regulations." There is no assurance, however,    
that the Company's securities will be approved for listing on the OTC Electronic
Bulletin Board or elsewhere. The Company anticipates that the Units offered     
hereby will be qualified for sale by the Company in a limited number of states. 
See "Risk Factors--Limits on Secondary Trading; Current Prospectus and State    
Blue Sky Registration Required to Exercise Class A Warrants."                   

Upon completion of the Offering, the Selling Unit Holder and Miller will
beneficially own approximately 89% of the Company's outstanding voting capital  
stock (not including Class A Warrants and options to be owned by them). See     
"Risk Factors--Control by Duncan Hill and Miller."                              

    The Units being offered for sale by the Company are being offered on a "firm
commitment" basis, subject to prior sale, when, as and if delivered to and      
accepted by the Underwriters. The Underwriters reserve the right to reject any  
order in whole or in part. It is expected that delivery of certificates         
representing the Units will be made against payment therefor on or about April  
 , 1998 at the office of the Representative at 17 Battery Place, New York, New
York 10004.                                                                     

   A SIGNIFICANT AMOUNT OF THE UNITS TO BE SOLD IN THE OFFERING MAY BE SOLD TO
CUSTOMERS OF THE UNDERWRITERS. SUCH CUSTOMERS SUBSEQUENTLY MAY ENGAGE IN        
TRANSACTIONS FOR THE SALE OR PURCHASE OF THE UNITS AND/OR THE SECURITIES        
INCLUDED THEREIN WITH OR THROUGH THE UNDERWRITERS.                              

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE UNITS, COMMON     
STOCK AND/OR CLASS A WARRANTS, INCLUDING OVER-ALLOTMENT, STABILIZING AND        
SHORT-COVERING TRANSACTIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A           
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."                            

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AVAILABLE INFORMATION 

Upon completion of the Offering, the Company will be subject to the     
information requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith will file reports and other        
information with the Securities and Exchange Commission (the "Commission").     
Reports and other information filed by the Company can be inspected and copied  
(at prescribed rates) at the Commission's Public Reference section, 450 Fifth   
Street, NW, Washington, D.C. 20549, as well as the New York Regional Office,    
Seven World Trade Center, New York, NY. The Commission maintains a Web site on  
the Internet (http://www.sec.gov) that contains reports, proxy and information  
statements and other information regarding issuers that file electronically with
the commission through the Electronic Data Gathering, Analysis, and Retrieval   
System (EDGAR).                                                                 

  The Company has filed with the Commission a registration statement on Form
SB-2, File No. 333-45863 (herein together with all amendments and exhibits      
referred to as the "Registration Statement") under the Securities Act of 1933,  
as amended (the "Securities Act"), of which this Prospectus forms a part. This  
Prospectus does not contain all of the information set forth in the registration
Statement, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. For further information, reference is made to
the Registration Statement. Statements contained in this Prospectus regarding   
the contents of any contract or other document referred to herein or therein are
not necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration         
Statement or such other document, each such statement being qualified by such   
reference.                                                                      

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to, and 
should be read in conjunction with, the more detailed information and the       
Financial Statements (including the notes thereto) appearing elsewhere in this  
Prospectus. In addition, unless otherwise indicated to the contrary, all        
information appearing herein does not give effect to the exercise of (i) the    
Over-Allotment Option; (ii) the Class A Warrants (including Class A Warrants    
included in the Over-Allotment Option and those owned by the Selling Security   
Holders); or (iii) the Underwriters' Unit Purchase Option. All share and per    
share amounts in this Prospectus give retroactive effect to a 10,000 for 1      
forward stock split effective December 8, 1997. See "Description of Securities, 
"Bridge Financing," and "Underwriting." Each prospective investor is urged to   
read this Prospectus in its entirety.                                           

THE COMPANY 

   The Havana Group, Inc. (the "Company") is a Delaware corporation engaged in
the business of (i) operating a retail smokeshop in Canton, Ohio which primarily
sells pipes, cigars and smoking accessories; (ii) marketing pipes, tobaccos and 
related accessories directly to consumers through its 48 page full color catalog
(the "Carey Smokeshop Catalog"); and (iii) providing a program of automatic     
periodic shipments of tobacco directly to consumers (the "Carey Tobacco Club"). 
The Company intends to create and develop a Cigar Club (the "Havana Group       
Direct") pursuant to which the Company will charge certain membership fees and  
offer certain cigar purchasing, warehousing and shipping services in return for 
membership, purchasing and shipping fees. The Company does not sell or          
distribute cigarettes or Cuban products and has no plans to do so in the future.
See "Use of Proceeds."                                                          

 The Company has one wholly-owned subsidiary, namely, Monarch Pipe Company
("Monarch"). Monarch manufactures pipes which are exclusively sold by the       
Company.                                                                        

  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. Unless otherwise         
indicated, all references in this Prospectus to the Company include the Company,
Monarch and its predecessor, 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.                                                          

   The Company had operated a smokeshop named "Carey's Smokeshop" from 1984 to
1996 to maintain a retail presence and provide the Company with a factory outlet
for its overstock products which had 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 pipes, cigars and smoking accessories and intends  
to sell other product lines, including fine wines and imported beers. The       
Company has applied for a license to sell such liquor products and is currently 
waiting to receive such license. The Company may expand the number of retail    
stores depending upon the success of its existing store and available external  
financing, if any.                                                              

    Currently, the Company derives its revenues from three sources; retail sales
from the Smokeshop, direct mail of catalogs and from the operation of its Carey 
Tobacco Club. During the year ended December 31, 1997, the Company mailed       
389,540 catalogs and generated sales of $1,097,670, approximately 74% of total  
gross revenue. Carey Tobacco Club, a monthly program of tobacco shipments that  
supplies pipe tobacco to individual Carey Tobacco Club members, generated       
$368,009 in gross sales,                                                        

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approximately 25% of total gross revenue. The Smokeshop was recently opened on  
December 8, 1997, and generated sales of $8,781 for the 23 day period of        
December 8 through December 31, 1997.                                           

RELATED PARTIES.                                                                

The Company is a subsidiary of Duncan Hill, a publicly held corporation 
which also controls a majority interest in Kids Stuff, Inc. ("Kids Stuff"),     
which is traded on the OTC Electronic Bulletin Board under the symbol "KDST."   
Since January 1, 1997, the telemarketing, order fulfillment, warehousing, data  
processing and administrative functions of the Company have been provided by    
Kids Stuff. The Company has recently executed an agreement with Kids Stuff for  
Kids Stuff to continue to provide such services on a fee basis. See "The Company
and its Parent" and "Certain Transactions."                                     

The executive offices of the Company are located at 4450 Belden Village 
Street, N.W., Suite 406, Canton, Ohio 44718, and the Company's telephone number 
is (330) 492-8090.                                                              

ORGANIZATION CHART (BEFORE OFFERING)

[LOGO]

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THE OFFERING

                                                        [Enlarge/Download Table]
                                                                                           
Securities Offered by            460,000 Units, each Unit consisting of one share of Common
  the Company................... Stock and two Class A Warrants. The Common Stock and Class
                                 A Warrants are not detachable or separately transferable  
                                 until the earlier of (i)      , 1998 (six months from the 
                                 date of this Prospectus) or (ii) the date selected by the 
                                 Representative in writing for separation (the "Separation 
                                 Date"). After the Separation Date, the Common Stock and   
                                 Class A Warrants will be detachable and may trade         
                                 separately. Each Class A Warrant entitles the holder to   
                                 purchase one share of Common Stock at an exercise price of
                                 $5.25 and is exercisable from the Separation Date until   
                                 five years after the date of this Prospectus. The Company 
                                 may redeem the Warrants at a price of $.10 per Class A    
                                 Warrant at any time after they become exercisable 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 the 20 consecutive trading days ending on the   
                                 15th day prior to the date on which the notice of         
                                 redemption is given. See "Description of Securities."     

Securities Offered by Sole                                                                 
  Stockholder of the Company.... 69,000 Units. In the event that the Over-Allotment Option 
                                 is exercised in whole or in part, these Units will be     
                                 purchased by the Underwriters from the Selling Unit       
                                 Holder. See "Principal and Selling Stockholder" and       
                                 "Certain Transactions."                                   

Concurrent Offering by Selling                                                             
  Security Holders.............. The Registration Statement of which this Prospectus forms 
                                 a part also includes an Alternate Prospectus that covers a
                                 "Concurrent Offering" by certain Selling Security Holders 
                                 (as defined below). The Concurrent Offering includes an   
                                 offering of 400,000 shares of Common Stock and 1,400,000  
                                 Class A Warrants owned by the Bridge Lender and the       
                                 exercise of the Common Stock underlying the 1,400,000     
                                 Class A Warrants by the transferees of the Bridge Lender. 
                                 The Alternate Prospectus also covers the resale of 200,000
                                 Class A Warrants owned by Miller and the exercise of such 
                                 200,000 Class A Warrants by the transferees of Mr. Miller.
                                 In addition to the foregoing, the Alternate Prospectus    
                                 includes the resale of up to 69,000 Units (identical to   
                                 those sold in the Offering) to be offered by Duncan Hill  
                                 and the exercise of the Common Stock underlying the       
                                 138,000 Class A Warrants by the transferees of Duncan     
                                 Hill. See "Principal and Selling Stockholders." To the    
                                 extent that the Underwriters exercise the Over-Allotment  
                                 Option as described herein, then the number of Units to be
                                 offered by Duncan Hill in the Concurrent Offering will be 
                                 proportionately reduced. (The Bridge Lender, Miller, and  
                                 Duncan Hill are hereinafter collectively referred to as   
                                 the "Selling Security Holders.") The securities offered as
                                 part of the Concurrent Offering may be sold at any time   
                                 after the date of this Prospectus. The Class A Warrants   
                                 held by the Selling Security Holders are identical to the 
                                 Class A Warrants being offered by the Company. Sales of   
                                 such securities or even the potential of such sales at any
                                 time may have an adverse effect on                        

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                                                        [Enlarge/Download Table]
                                                                                           
                                 the market prices of the securities offered hereby. See   
                                 "Certain Transactions," and "Selling Security Holders" and
                                 "Risk Factors-- Potential Adverse Effect of Redemption or 
                                 Exercise of Class A Warrants." Investors in the Offering  
                                 should consider the large number of securities registered 
                                 for sale at any time on or after the date of this         
                                 Prospectus on behalf of Selling Security Holders in the   
                                 Concurrent Offering in relation to the number of          
                                 securities being offered in the Offering and that such a  
                                 number (including the potential or actual sale) of such   
                                 securities is likely to materially adversely impact any   
                                 trading market that may develop in the Company's          
                                 securities.                                               

Use of Proceeds................. The Company intends to apply the net proceeds of the      
                                 Offering primarily for the purchase of inventory, humidor 
                                 construction, the repayment of $102,000 in principal and  
                                 interest of a non-convertible note held by a Selling      
                                 Security Holder, the payment of the first year's Preferred
                                 Stock dividends of $110,000 to Duncan Hill, Officers'     
                                 Salary, Marketing and for working capital and general     
                                 corporate purposes. See "Use of Proceeds."                

Risk Factors.................... The Offering involves a high degree of risk and immediate 
                                 and substantial dilution. These risks include, without    
                                 limitation, the following: Chief Executive Officer will   
                                 not be Required to Work Full Time; Dependence Upon        
                                 Miller/Need for Additional Management, Potential Conflicts
                                 of Interest; Lack of At Least Two Independent Directors   
                                 and Committees Thereof; Technological Changes in Control  
                                 by Duncan Hill and Miller; Company's History of Operating 
                                 and Net Losses and Uncertainty as to Future Operating     
                                 Results; Company Guarantee of Kids Stuff Line-of-Credit;  
                                 Dependence Upon Kids Stuff, an affiliate of the Company;  
                                 Dependence on Offering Proceeds--Payments to the Bridge   
                                 Lender, Miller and Duncan Hill; Possible Need for         
                                 Additional Financing; Constraints on Ability to Satisfy   
                                 Demand for Premium Cigars; Positive Trends for Cigar      
                                 Market May Not Continue; Dependence Upon One Retail       
                                 Smokeshop; Product Sourcing; Potential Product Liability; 
                                 Competition; Extensive and Increasing Regulation of       
                                 Tobacco Products; Tobacco Industry Litigation; State Sales
                                 Tax Collection; Social, Political and Economic Risks      
                                 Associated with International Trade; Technological Changes
                                 in Distribution and Marketing Methods; Management's Broad 
                                 Discretion in the Application of Proceeds of the Offering;
                                 Patents Trade Names and Trademarks; No Prior Public       
                                 Market/Market Volatility; SEC investigation Involving the 
                                 Representative; NASD Complaint Against the Representative;
                                 Possible Adverse Effect on Liquidity and Price of the     
                                 Company's Securities Due to SEC Investigation and NASD    
                                 Complaint; Immediate and Substantial Dilution to Public   
                                 Investors; and Recent Sale of Securities. See "Risk       
                                 Factors" and "Dilution."                                  

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CAPITALIZATION

                                                                [Download Table]
                                                                                
Common Stock Outstanding prior to the Offering(1).... 1,000,000 Shares          

Common Stock to be Outstanding after the                                        
  Offering(2)........................................ 1,860,000 Shares          

Class A Warrants Outstanding before Offering(3)...... -0- Class A Warrants      

Class A Warrants to be Outstanding after                                        
  Offering(3)........................................ 2,658,000 Class A Warrants

Series A Non-Convertible Preferred Stock(4).......... 5,000,000 Shares          

Series B Convertible Preferred Stock(5).............. 1,100,000 Shares          

Proposed OTC Bulletin Board Symbols                                             

    Units............................................                           

    Common Stock.....................................                           

    Warrants.........................................                           

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

(1) Does not include (i) options to purchase 260,000 shares of Common Stock     
    owned by certain directors of the Company; (ii) warrants to purchase 138,000
shares of Common Stock owned by the Selling Unit Holder and Warrants to 
    purchase 200,000 shares of Common Stock owned by Miller, which warrants upon
  the completion of the Offering automatically convert into Class A Warrants
   identical to the Class A Warrants sold in the Offering; (iii) a convertible
  note owned by the Bridge Lender convertible into a total of 400,000 shares
of Common Stock and 1,400,000 Class A Warrants, such note automatically 
converts upon the completion of the Offering; and (iv) up to 1,100,000  
 shares issuable upon conversion of the Series B Preferred Stock (see Note
3).                                                                     

(2) The 1,860,000 shares of Common Stock includes 400,000 shares of Common Stock
to be issued to a Bridge Lender automatically upon the completion of the
Offering pursuant to a convertible note. The 1,860,000 shares do not    
 include: (i) 920,000 shares of Common Stock issuable upon the exercise of
  the Class A Warrants included in the Units offered hereby; (ii) options to
   purchase up to 260,000 shares of Common Stock owned by certain directors of
    the Company; (iii) warrants to purchase 138,000 shares of Common Stock owned
    by the Selling Unit Holder and warrants to purchase 200,000 shares of Common
 Stock owned by Miller, which warrants upon the completion of the Offering
   automatically convert into warrants identical to the Class A Warrants; (iv)
1,400,000 shares of Common Stock issuable upon the exercise of 1,400,000
Class A Warrants attributable to the Bridge Lender; (v) 1,100,000 shares
  issuable upon conversion of the Series B Preferred Stock (see Note 5); and
(vi) 138,000 shares of Common Stock issuable upon exercise of the       
Underwriters' Unit Purchase Option and underlying warrants.             

(3) Prior to the Offering, the Company has no Class A Warrants outstanding.     
  However, it has outstanding warrants and a convertible note which upon the
completion of the Offering automatically convert into an aggregate of   
  1,738,000 Class A Warrants. Does not include 92,000 Warrants issuable upon
exercise of the Underwriters' Unit Purchase Option.                     

(4) The Selling Unit Holder, the Holder of the Series A Preferred Stock, has the
   right to vote each share of Preferred Stock on the same basis as each share
of Common Stock. See "Description of Securities."                       

(5) The Selling Unit Holder, the Holder of the Series B Preferred Stock, has the
right to convert each share of Preferred Stock into one share of Common 
    Stock commencing any time after the Company has achieved pre-tax earnings of
at least $500,000 during any fiscal year.                               

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SUMMARY FINANCIAL DATA

The summary financial data is derived from the historical financial     
statements of the Company. The adjusted financial statements of the Company are 
derived from the historical financial statements of the Company and gives effect
to the completion of a $200,000 bridge financing in January 1998. The pro forma 
financial statements are derived from the adjusted financial statements and     
gives effect to the sale of 460,000 Units offered hereby and the automatic      
conversion of a convertible note upon the completion of the Offering into a     
total of 400,000 shares of Common Stock and 1,400,000 Class A Warrants. The     
financial statements of the Company for dates and periods prior to December 5,  
1997 are those of its predecessor, Carey. This summary financial data should be 
read in conjunction with "Management's Discussion and Analysis of Financial     
Condition and Results of Operations" as well as the Company's historical        
financial statements and the related notes thereto, and the Company's pro forma 
financial statements and the related notes thereto, included elsewhere in the   
Prospectus.                                                                     

                                                        [Enlarge/Download Table]

                                                            YEAR ENDED DECEMBER 31,          
                                                  -------------------------------------------
                                                                                             
                                                      1995           1996           1997     
                                                  ------------  --------------  -------------
Statement of Operational Data:                                                               
  Net Sales...................................... $  1,668,927   $  1,656,316    $ 1,427,574 
  Net Loss.......................................      (64,626)      (115,523)       (61,772)
  Net Loss per common share...................... $       (.06)  $       (.12)   $      (.06)
  Weighted average number of shares outstanding                                              
    during the period(1).........................    1,000,000      1,000,000      1,000,000 



                                                     ACTUAL     AS ADJUSTED(2)  PRO FORMA(3) 
                                                  ------------  --------------  -------------
                                                                                             
Balance Sheet Data:                                                                          
  Total Assets................................... $  1,240,228   $  1,440,228    $ 3,388,181 
  Net Tangible Assets............................      404,451        504,451      2,552,404 
  Working Capital................................      335,747        435,747      2,483,700 
  Total Liabilities..............................      317,115        417,115        317,115 
  Stockholder's Equity...........................      923,113      1,023,113      3,071,066 

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

(1) Reflects the reincorporation and recapitalization of Carey in Delaware. See 
"The Company and its Parent"--the "Reincorporation."                    

(2) Reflects the completion of $200,000 of bridge financing. See "Use of        
Proceeds--Bridge Financing."                                            

(3) Reflects the sale of 460,000 Units offered hereby, and the receipt of the   
  net proceeds and repayment of $102,000 of indebtedness including estimated
accrued interest.                                                       

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RISK FACTORS

   An investment in the securities offered hereby is speculative and involve a
high degree of risk and substantial dilution and should only be purchased by    
investors who can afford to lose their entire investment. Each prospective      
investor should carefully consider the following risk factors inherent in, and  
affecting the business of, the Company and the Offering, together with the other
information in this prospectus, before making an investment decision.           

   CHIEF EXECUTIVE OFFICER WILL NOT BE REQUIRED TO WORK FULL TIME.  Miller, is
a co-founder of Duncan Hill, which is a publicly held holding corporation that  
controls the Company and Kids Stuff. 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 and the sole executive officer of 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. See "Management."                       

  DEPENDENCE UPON MILLER/NEED FOR ADDITIONAL MANAGEMENT.  The success of the
Company is highly dependent upon the continued services of Miller, the Company's
only executive officer who is Chairman of the Board and Chief Executive Officer 
and a part-time employee of the Company. Miller, one of the co-founders of the  
Company's parent who is also an employee of Duncan Hill and Kids Stuff, is      
responsible for the strategic planning and development of the Company, pursuant 
to an employment agreement, expiring December 31, 2002. However, if Miller's    
employment agreement with the Company is either terminated or not renewed, or if
he is unable to perform his duties, there could be a material adverse effect    
upon the business of the Company until a suitable replacement was found. The    
Company will attempt to obtain a $1 million key man life insurance policy on    
Miller's life. The success of the Company's future growth and profitability will
depend, in part, on the Company's ability to recruit and retain additional      
qualified Management personnel over time, including a suitable candidate to     
succeed Miller, who is 61 years of age, as Chief Executive Officer. There can be
no assurance, however , that the Company will be able to recruit and retain such
additional qualified Management personnel. See "Management."                    

 POTENTIAL CONFLICTS OF INTEREST.  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   
only one disinterested director and Duncan Hill and Miller control the election 
of the directors including the disinterested directors. See "Management" and    
"The Company and it's Parent."                                                  

LACK OF AT LEAST TWO INDEPENDENT DIRECTORS AND COMMITTEES THEREOF.  The 
Company has three directors, including Miller who is the only executive officer 
of the Company and another director who is a director of Duncan Hill, an        
affiliate of the Company. The absence of at least two outside or disinterested  
directors and committees composed of such disinterested directors could result  
in less objectivity and an increased risk for conflicts of interest with respect
to decisions made by the Board of Directors. See "Management."                  

   CONTROL BY DUNCAN HILL AND MILLER.  Upon completion of the Offering, Duncan
Hill and Miller (the "Control Group"), will beneficially own and control (not   
including outstanding Class A Warrants and options) approximately 54% of the    
Company's outstanding Common Stock (approximately 50% if the Underwriters'      
Over-Allotment Option is exercised in full), 100% of the Company's outstanding  
Series A Preferred Stock (5,000,000 shares) which has the same voting privileges
as the Common Stock, and 100% of the Company's Series B Convertible Preferred   
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privileges as the Common Stock and is convertible into the Company's Common     
Stock if certain criteria are met. Accordingly, while the new investors in the  
Offering will have provided approximately 93% of the total consideration paid   
for the Company's outstanding Common Stock, the Control Group will beneficially 
own approximately 89% of the Company's outstanding voting capital stock. As a   
result, the Control Group will remain in a position to effectively elect all of 
the directors of the Company and control its affairs and policies. Miller and   
his wife beneficially own an aggregate of approximately 68% of the shares of the
outstanding common stock of Duncan Hill, and thus are in a position to exercise 
effective control over the affairs of the Company through their control over    
affairs of Duncan Hill. Ultimate voting control by Miller may discourage certain
types of transactions involving actual or potential control of the Company,     
including transactions in which the public holders of the Common stock might    
receive a premium for their shares over prevailing market prices. See "Principal
and Selling Stockholders."                                                      

HISTORY OF OPERATING AND NET LOSSES/UNCERTAINTY AS TO FUTURE OPERATING  
RESULTS.  The Company's bridge financing completed in January, 1998 will result 
in a one time charge to earnings of approximately $3,350,000 in 1998. See "Use  
of Proceeds--Bridge Financing." Previously, the Company experienced losses for  
the years ended December 31, 1997 and 1996 of $61,772 and $115,523,             
respectively. The Company believes that in order to achieve profitability, it   
must increase retail and catalog sales, expand the membership of the Havana     
Group Direct and effectively monitor and control costs. Accordingly, there can  
be no assurance that the Company will operate profitably in the future.         
Furthermore, future operating results depend upon many factors, including       
general economic conditions, the level of competition and the ability of the    
Company to continue to attract and retain customers successfully. See           
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and "Business."                                                     

  COMPANY GUARANTEE OF KIDS STUFF LINE OF CREDIT.  The assets of the Company
are pledged as collateral along with the assets of Duncan Hill to guarantee an  
$800,000 revolving bank line of credit in the name of Kids Stuff, a subsidiary  
of Duncan Hill. The bank line of credit, which had a balance of $732,000 at     
April 15, 1998, is for an open term, payable on demand. The repayment of this   
credit facility is also irrevocably guaranteed by Miller and the Company and    
cannot be terminated by them unless Kids Stuff pays off the line of credit in   
full. In the event that Kids Stuff is unable to meet the terms and conditions of
the line of credit and the bank were to collect against the Company as guarantor
pursuant to an irrevocable guarantee, this could adversely affect the Company's 
operations. In this respect, at December 31, 1997, Kids Stuff has working       
capital of $162,877 and a net worth of $1,822,664. For the years ended December 
31, 1997, 1996 and 1995, Kids Stuff incurred a net profit (loss) of $50,097,    
$(521,640) and $(536,992), respectively. Although United Bank has been requested
by Kids Stuff to waive the Company's guarantee, no assurance can be given that  
United Bank will honor such request. See "Certain Transactions," "The Company   
and Its Parent" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."                                                     

DEPENDENCE UPON KIDS STUFF, AN AFFILIATE OF THE COMPANY.  The Company's 
ability to effectively promote products, manage inventory, efficiently purchase,
sell and ship products, and maintain cost-effective operations are each         
dependent upon the accuracy, capability and proper utilization of the Company's 
outside data processing and telephone systems. The Company's telemarketing, data
processing, customer service and management information systems functions are   
performed by and purchased from Kids Stuff, an affiliate of the Company,        
pursuant to an agreement. A significant disruption or loss affecting the        
telephone or computer systems or any significant damage to Kids Stuff's         
facilities could have a material adverse effect on the Company's business. The  
Company has an agreement with Kids Stuff to also provide the Company with order 
fulfillment, warehousing, and administrative services. These services are       
essential to the Company's operations. If for any reason whatsoever Kids Stuff  
were unable to provide these services, the Company's operations may be          
materially adversely affected until such time as the Company is able to provide 
these services, itself or through an independent third party. See "Certain      
Transactions," "The Company and Its Parent" and "Management's Discussion and    
Analysis of Financial Condition and Results of Operations."                     

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  DEPENDENCE ON OFFERING PROCEEDS--PAYMENTS TO THE BRIDGE LENDER, MILLER AND
DUNCAN HILL.  As a result of its operating results and lack of working capital, 
the Company needs the proceeds of the Offering primarily for the purchase of    
inventory, humidor construction and for working capital. Further, approximately 
$50,000 has been allocated toward payment of Miller's salary, approximately     
$110,000 of the net proceeds of the Offering will be paid to an affiliate of the
Company and approximately an additional $102,000 will be paid to the Selling    
Security Holder. See "Use of Proceeds," "Business" and "Management's Discussion 
and Analysis of Financial Condition and Results of Operations."                 

 POSSIBLE NEED FOR ADDITIONAL FINANCING.  The proceeds of the Offering are
estimated to be applied over a period of at least twelve months following the   
completion of the Offering. The Company may require additional financing during 
such twelve month period due to unforeseen events or to open additional retail  
smoke shops. The Company does not currently have the capital to open such       
additional retail smoke shops and is expected to be dependent upon external     
financing beyond the proceeds of the Offering to meet this potential objective. 
No assurances can be given that such financing will be available or, if         
available, that such financing can be obtained on terms satisfactory to the     
Company. See "Use of Proceeds" and "Management's Discussion and Analysis of     
Financial Condition and Results of Operations."                                 

 CONSTRAINTS ON ABILITY TO SATISFY DEMAND FOR PREMIUM CIGARS.  The Company
has experienced, and may from time-to-time experience a shortage of certain     
cigars, especially premium cigars. Although many premium cigar manufacturers    
have taken measures to increase production, there can be no assurance that the  
Company will have access to sufficient supplies of premium cigars to meet its   
customers' expressed demands. The Company is not a party to long-term supply    
contracts with any manufacturers. The Company relies upon the strength of its   
relationships with leading manufacturers to meet its supply requirements. There 
can be no assurance that the Company will be able to continue to maintain these 
relationships or that such relationships will be sufficient to enable the       
Company to meet future demand for its proprietary cigars and other premium      
branded cigars which the Company sells. Any material inability of the Company to
expand its current supply of cigars in a timely manner would have a material    
adverse effect on the Company's business, results of operations and financial   
condition.                                                                      

   Cigar manufacturers have experienced, and continue to experience, shortages
of properly aged and blended tobacco ready for manufacturing, and shortages of  
skilled employees for blending and rolling premium cigars. In general, the aging
process for tobacco requires that tobacco be purchased several years in advance 
of actual use in the manufacturing process. Tobacco shortages may prevent the   
Company from purchasing sufficient cigars to meet demand, maintaining its growth
expectations or even maintaining its current level of sales. These factors are  
all outside the control of the Company, may significantly impact the ability of 
the Company to secure an adequate supply of premium cigars in a timely fashion  
and could have a material adverse effect on the Company's business, results of  
operations and financial condition. See "Business."                             

 POSITIVE TRENDS FOR CIGAR MARKET MAY NOT CONTINUE.  According to industry
sources, the cigar industry experienced declining unit sales between 1964 and   
1993. While the cigar industry has experienced increasing annual unit sales     
since 1993, there can be no assurance that recent positive trends will continue 
on a long-term basis or that new customers will remain cigar smokers in the     
future. In addition, the market for premium cigars, and consequently the        
Company's sales and results of operations, will be subject to fluctuations based
upon general economic conditions in the United States. If there were to be a    
general economic downturn or recession in the United States, the Company expects
that the market for luxury related items such as premium cigars would decrease. 
In the event of such an economic downturn or recession, there can be no         
assurance that the Company's business, results of operations and financial      
condition would not be materially adversely affected.                           

DEPENDENCE UPON ONE RETAIL SMOKESHOP.  The Company owns and operates one
retail store opened in December 1997 (the "Smokeshop") and may open additional  
retail cigar stores depending upon the success of its existing store and        
available external financing. No assurance can be given that the retail         

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smokeshop will be profitable in the future or that any additional Company stores
will be opened and achieve profitability. The profitable operation of any new   
retail stores is dependent on a number of factors, including obtaining          
sufficient financing, identifying appropriate geographic markets, evaluating the
suitability of specific locations within such markets, hiring, training and     
assimilating management and store level employees, negotiating acceptable lease 
terms and constructing and opening new stores in a timely and cost effective    
manner. There can be no assurance that the Company will be able to successfully 
identify, open, finance and operate additional retail stores. See "Business."   

   PRODUCT SOURCING.  The Company acquires products for resale in its catalogs
from numerous domestic and international vendors. All "E A Carey" and "Duncan   
Hill" pipes are manufactured by the Company's wholly-owned subsidiary, Monarch. 
Monarch supplies approximately 16% of the Company's catalog products. Other than
Monarch, the Company currently has three vendors that supply more than 10% of   
its catalog products. These companies include Lane Limited (32.4%), Hollco-Rohr 
Co. (13.6%) and Consolidated Cigar Inc. (12.7%). Any disruption of service from 
any of these companies may have an adverse effect on the Company's future sales.
See "Business--Product Sourcing."                                               

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 one year and are     
currently in effect through September 17, 1998. Although the Company believes   
that its present insurance coverage is sufficient for its current level of      
business operations, there is no assurance that such insurance will be          
sufficient to cover potential claims, or that adequate, affordable insurance    
coverage will be available to the Company in the future. An uninsured successful
claim against the Company or a successful claim in excess of the liability      
limits or relating to an injury excluded under the policy could have a material 
adverse effect on the Company. See "Business--Product Liability Insurance."     

COMPETITION.  The retail and mail order catalog business is highly      
competitive. The Company's catalogs compete with several other cigar mail order 
catalogs. The Company's retail store competes with other smokeshops, estimated  
at over 1,000 in the United States. Most of the Company's competitors have      
greater financial, distribution and marketing resources than the Company. There 
can be no assurance that the Company will be able to compete effectively with   
existing or potential competitors. See "Business-- Competition."                

EXTENSIVE AND INCREASING REGULATION OF TOBACCO PRODUCTS.  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. A variety of
bills relating to tobacco issues have been recently introduced in the United    
States Congress, including bills that, if passed, would: (i) curtail the        
advertising and promotion of all tobacco products and restrict or eliminate the 
deductibility of such advertising expenses; (ii) increase labeling requirements 
on tobacco products to include, among other things, addiction warnings and lists
of additives and toxins; (iii) modify federal preemption of state laws to allow 
state courts to hold tobacco manufacturers liable under common law or state     
statutes; (iv) shift regulatory control of tobacco products at the federal level
from the United States Federal Trade Commission (the "FTC") to the United States
Food and Drug Administration (the "FDA") and require the tobacco industry to    
fund the FDA's oversight; (v) increase tobacco excise taxes; (vi) restrict the  
access to tobacco products by, among other things, banning the distribution of  
tobacco products through the mail, except for sales subject to proof of age;    
(vii) require licensing of retail tobacco product sellers; (viii) regulate      
tobacco product development; and (ix) require tobacco companies to pay for      
healthcare costs incurred by the federal government in connection with tobacco  
related diseases. Although hearings have been held on certain of these          
proposals, to date, none of such proposals have been passed by Congress. Future 
enactment of such proposals or similar bills may have a material adverse effect 
on the Company's business, results of operations and financial condition.       

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    In August 1996, the FDA determined that nicotine is a drug. Accordingly, the
FDA determined that it had jurisdiction over cigarettes and smokeless tobacco   
products, pursuant to the FDA determination that cigarette and smokeless tobacco
products are drug delivery devices used for the delivery of nicotine. Although  
certain legal challenges to the FDA's determination are pending, there can be no
assurance that such determination will not be upheld, nor that in the future,   
the FDA will not prevail in an attempt to extend such jurisdiction to cigars. In
addition, a majority of states restrict or prohibit smoking in certain public   
places and restrict sale of tobacco products (including cigars) to minors. Local
legislative and regulatory bodies have increasingly moved to curtail smoking by 
prohibiting smoking in certain buildings or areas or by requiring designated    
"smoking" areas. Individual establishments such as bars and restaurants have    
further prohibited pipe and cigar smoking even though other tobacco products are
permitted in such establishments. Further restrictions of a similar nature could
have a material adverse effect on the business, results of operations and       
financial condition of the Company. Numerous proposals have also been considered
at the state and local level restricting smoking in certain public areas.       

Federal law has required health warnings on cigarettes since 1965 and on
smokeless tobacco since 1986. Although no federal law currently requires that   
cigars carry such warnings, California has enacted laws requiring that "clear   
and reasonable" warnings be given to consumers who are exposed to chemicals     
determined by the state to cause cancer or reproductive toxicity, including     
tobacco smoke and several of its constituent chemicals. Similar legislation has 
been introduced in other states. In addition, effective January 1, 1998,        
smoking, including cigar smoking, has been banned by the State of California in 
all bars, taverns and clubs where food and alcohol is served. Other legislation 
introduced in a state would, if enacted, require warning labels on cigar boxes. 
Certain states have enacted legislation which require cigar manufacturers to    
provide information on the levels of certain substances in their cigars to these
states on an annual basis. There can be no assurance that such legislation or   
more restrictive legislation will not be passed by one or more states in the    
future. Consideration at both the federal and state level also has been given to
consequences of second hand smoke. There can be no assurance that regulations   
relating to second hand smoke will not be adopted or that such regulations or   
related litigation would not have a material adverse effect on the Company's    
business, results of operations and financial condition.                        

    Increased cigar consumption and the publicity such increase has received may
increase the risk of additional regulation of cigars. Increased publicity may   
prompt research studies by various agencies such as the National Cancer         
Institute, the American Cancer Society, and others. Such research can, by its   
ultimate content, influence additional regulation of cigars by federal, state,  
and local regulatory bodies. There can be no assurance that any such legislation
or regulation would not have a material adverse effect on the Company's         
business, results of operations and financial condition. See "Business--Tobacco 
Industry-- Government Regulations."                                             

 On a national level, Senate Bill 1415 has been introduced by Senator John
McCain. This Bill proposes the comprehensive regulation of tobacco products, but
at the time of its introduction, it specifically excluded the regulation of     
cigars and pipe tobacco. However, the Bill does contain a provision requiring   
the Secretary of Health and Human Services to monitor the use of cigars and pipe
tobacco by underage individuals. The Secretary is required to notify Congress   
"if the Secretary determines that a decrease in underage use of tobacco products
resulting from the enactment of Senate Bill 1415 has produced an increase in    
underage use of pipe tobacco and cigars." Presumably, at that time, Congress    
would consider expanding the definition of regulated products to include cigars 
and pipe tobacco.                                                               

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 FTC Chairman indicated that warning labels might be justified in the future.

 TOBACCO INDUSTRY LITIGATION.  The tobacco industry has experienced and is
experiencing significant health-related litigation. Private plaintiffs in such  
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punitive damages, for various 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. Over 40 states   
have filed lawsuits against the major United States cigarette manufacturers to  
recover billions of dollars in damages, primarily costs of medical treatment of 
smokers. On June 20, 1997, the Attorneys General of 40 states and several major 
cigarette manufacturers announced a proposed settlement of the lawsuits filed by
these states (the "Proposed Settlement"). The Proposed Settlement, which will   
require Federal legislation to implement, is complex and may change             
significantly or be rejected. The Proposed Settlement would significantly change
the way in which cigarette companies and tobacco companies do business. Among   
other things, the tobacco companies would pay hundreds of billions of dollars to
the various states; the FDA could regulate nicotine as a "drug" and tobacco     
products as "drug delivery devices;" all outdoor advertising, sports event      
advertising and advertising on non-tobacco products would be banned and certain 
class action lawsuits and punitive damage claims against tobacco companies would
be prohibited. Since changes to the Proposed Settlement may be made, or the     
Proposed Settlement may not be adopted by Federal Legislation, or some of the   
major United States cigarette manufacturers may withdraw their participation in 
the Proposed Settlement, the potential impact of the Proposed Settlement on the 
cigar industry in general and the Company in particular is uncertain. There can 
be no assurance that similar litigation will not be brought against cigar       
manufacturers and distributors. 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 State of Florida   
has entered into a separate settlement agreement with major United States       
cigarette manufacturers with respect to tobacco products, including             
roll-your-own and little cigars. This settlement agreement provides, in part,   
for a ban on billboard and transit advertising, significant document disclosure 
by the settling cigarette companies, billions of dollars in settlement payments 
and certain adjustments pending the resolution of the Proposed Settlement. The  
State of Mississippi has announced a separate settlement agreement with major   
cigarette manufacturers which provides for a payment of $4.0 billion, however,  
if the Proposed Settlement is approved the Proposed Settlement will supersede   
the Mississippi settlement. The recent increase in the sales of cigars and the  
publicity of such increases may increase the probability of legal claims. See   
"Business--Tobacco Industry Litigation."                                        

    SALES TAX COLLECTION.  Under current law, catalog retailers are permitted to
make sales in states where they do not have a physical presence (e.g. offices)  
without collecting sales tax. Congress, however, has the power to change these  
laws. Since 1987, legislation has been introduced periodically in the U.S.      
Congress which would permit states to require sales tax collection by mail order
companies. To date, this proposed legislation has not been passed. Should       
Congress, however, pass such legislation in the future, most states could be    
expected to require sales tax collection by out-of-state mail order companies.  
This would increase the cost of purchasing the Company's products in those      
states and eliminate whatever competitive advantage that the Company may        
currently enjoy with respect to in-state competitors in terms of sales taxation,
as well as increasing the administrative and overhead costs to the Company in   
connection with the collection of such sales tax. There can be no assurances    
given that these state sales tax laws will not be changed in the future to the  
detriment of the Company.                                                       

SOCIAL, POLITICAL AND ECONOMIC RISKS ASSOCIATED WITH INTERNATIONAL      
TRADE.  The cigars sold by the Company are manufactured outside the United      
States, principally in the Dominican Republic, Honduras, and Nicaragua. As a    
result, the Company is exposed to the risk of changes in social, political and  
economic conditions inherent in foreign operations and international trade      
including changes in the law and policies that govern foreign investment and    
international trade in such countries, as well as, to a lesser extent, changes  
in United States laws and regulations relating to foreign investment and trade. 
Any such social, political or economic changes could pose, among other things,  
the risk of supply interruption or significant increases in the prices of       
tobacco products. Any such changes in social, political or economic conditions  
may have a material adverse effect on the Company's business, results of        
operations or financial conditions.                                             

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    TECHNOLOGICAL CHANGES IN DISTRIBUTION AND MARKETING METHODS.  The retail and
direct marketing industry may be affected by ongoing technological developments 
in distribution and marketing methods such as on-line catalogs and Internet     
shopping. As a result, the Company's future success will depend on its ability  
to keep pace with technological developments and respond to new customer        
requirements. There can be no assurance that the Company's current marketing    
methods will remain competitive in light of future technological innovations.   
See "Business--Marketing."                                                      

MANAGEMENT'S BROAD DISCRETION IN THE APPLICATION OF PROCEEDS OF THE     
OFFERING.  A portion of the net proceeds of the Offering (approximately $148,000
or approximately 7% of the net proceeds) will be used for working capital and   
general corporate purposes of the Company. Accordingly, since no specific       
purpose of the funds allocated to working capital has been identified,          
management of the Company will have broad discretion in the use of proceeds of  
the Offering allocated toward working capital. Further, the Company's intended  
uses of the net proceeds of the offering are estimates only and there could be  
significant variations in the uses of proceeds due to changes in business or    
economic circumstances. Accordingly, the Company reserves the right to          
reallocate the uses of proceeds depending upon any such change of circumstances.
See "Use of Proceeds."                                                          

   PATENTS, TRADE NAMES AND TRADEMARKS.  The Company owns two patents: one for
the Aerosphere Smoking systems; and one for the E. A. Carey Magic Inch Smoking  
System. The Company also owns the registered trademarks of the Duncan Hill      
smoking pipe, "Carey" the registered trade name for the Carey smoking pipe, and 
"Magic Inch", the registered trade name of the Carey smoking system. All        
trademarks and patents are currently maintained in effect, with the exception of
the U.S. patent for the Carey Magic Inch Smoking System which has expired. There
can be no assurance as to the extent of the protection that will be provided to 
the Company as a result of having such patents, trademarks and trade names or   
that the Company will be able to afford the expenses of any complex litigation  
which may be necessary to enforce the proprietary rights. See                   
"Business--Patents, Trade Names and Trademarks."                                

NO PRIOR PUBLIC MARKET.  Prior to the Offering, there has been no public
market for the Company's Units, Common Stock or Class A Warrants. There is no   
assurance that following the Offering an active public trading market will      
develop or be sustained or that the Units, Common Stock or Class A Warrants will
be resold at or above the initial public offering price. Further, in the        
Concurrent Offering, the Company has registered for resale up to 400,000 shares 
of Common Stock and up to 1,738,000 Class A Warrants and the issuance of up to  
1,738,000 shares of Common Stock pursuant to the exercise of such Class A       
Warrants. Investors in the Offering should consider the large number of         
securities registered for sale at any time on or after the date of this         
Prospectus on behalf of Selling Security Holders in the Concurrent Offering in  
relation to the number of securities being offered in the Offering and that such
a number (including the potential or actual sale) of such securities is likely  
to materially adversely impact any trading market that may develop in the       
Company's securities. Additionally, if a market does develop, the market price  
of the Company's securities may trade below the initial public offering price in
response to changes in the general condition of the economy or the retail and   
catalog business, as a whole, as well as the Company's periodic financial       
results which may fluctuate quarterly as a result of several factors, including 
the timing of catalog mailings, and changes in the selection of merchandise     
offered and sold.                                                               

SEC INVESTIGATION INVOLVING THE REPRESENTATIVE.  The Company has been   
advised by the Representative that the Securities and Exchange Commission       
("SEC") has issued a formal order directing a private investigation by the staff
of the SEC. Such order empowers the SEC staff to investigate whether, from June 
1995 to the present, the Representative and certain other persons and/or        
entities may have engaged in fraudulent acts or practices in connection with the
purchase or sale of securities of certain other companies in violation of       
Sections 10(b) and 15(c)(1) of the Securities Exchange Act of 1934, as amended  
(the "Exchange Act") and Section 17(a) of the Securities Act. These acts or     
practices include whether the Representative and certain other brokers or       
dealers effected transactions or induced transactions by making untrue          
statements of material fact and whether the Representative and certain others   
have                                                                            

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engaged in manipulative, deceptive or other fraudulent devices. The formal order
also concerns whether the Representative and certain others who have agreed to  
participate in a distribution have violated Rule 10b-6 of the Exchange Act by   
having bid for or purchased securities for accounts in which it had a beneficial
interest or which is the subject of such distribution. As of April 10, 1998, the
Representative understands that the SEC investigation is ongoing. The           
Representative cannot predict whether this investigation will result in any type
of enforcement action against the Representative. See "Risk Factor"-- "Possible 
Adverse Effect on Liquidity and Price of the Company's Securities Due to SEC    
Investigation and NASD Complaint" and "Underwriting."                           

    NASD COMPLAINT AGAINST THE REPRESENTATIVE  The Company has also been advised
by the Representative that during 1996 and 1997, the staff of the NASD conducted
an inquiry into the trading and sales practices of securities of another company
(the "issuer") in and around April 1995. In connection with the inquiry, the    
NASD staff obtained documents from the Representative and conducted             
on-the-record interviews of, among others, the Representative's President-Chief 
Executive Officer, Head Trader and Chief Financial Officer. On February 20, 1998
the NASD Department of Enforcement filed an administrative complaint against the
Representative, a principal of the firm and two traders from other broker-      
dealers. The complaint alleges that the Representative, acting through its then 
President-Chief Executive Officer-Sole Owner, acquired and distributed certain  
securities of the issuer as "statutory underwriters" without registration under 
Section 5 of the Securities Act representing approximately 28% of the available 
float in the security in purported violation of NASD Rule 2110 and failed to    
provide customers with an offering prospectus. The complaint further alleges    
that at the same time the Representative and its then President-Chief Executive 
Officer-Sole Owner (the "Respondents") (i) entered into a consulting agreement  
with the issuer to arrange for the sale of certain of its securities at a       
"designated price" slightly below the market at the time; (ii) sold short to    
retail customers the issuer's securities at prices substantially above the      
designated price; (iii) acquired from five short term investors securities of   
the issuer to cover the Representative's large short inventory position in what 
had previously been an inactive or thinly traded market for the issuer's        
securities; (iv) illegally bidded for, purchased, or induced others to purchase 
the issuer's securities in the secondary market while a distribution was still  
in progress; and (v) continued to make a market in the corporations's stock all 
in purported violation of Section 10(b) of the Exchange Act and Rule 10b-6      
thereunder and NASD Rules 2110 and 2120. Moreover, the complaint alleges that   
the Respondents caused the aforementioned alleged unregistered distribution     
without filing the necessary documents with the NASD's Corporate Financing      
Department and failed to disclose to customers alleged unfair excessive and     
unreasonable compensation received from the distribution in violation of NASD   
Rules 2110 and 2710. In addition, the complaint alleged that the Respondents    
fraudulently manipulated the market for the issuer's common stock by arbitrarily
increasing the share price and by artificially inflating the reported trade     
volume through "wash" and "matched" or circular trading so as to create the     
appearance of an active market in the stock in purported violation of Section   
10(b) of the Exchange Act and Rule 10b-5 thereunder and NASD Rules 2110 and     
2120. According to the complaint, alleged manipulation resulted in an illicit   
profit to the Representative of approximately $402,509. The Complaint contains  
the following prayer for relief: (1) findings of fact and conclusions of law    
that Respondents committed the violations charged and alleged; (2) an order     
imposing sanctions upon the Respondents in accordance with NASD Rule 8310; (3)  
an order requiring Respondents to disgorge fully any and all ill-gotten gains   
and/or make full and complete restitution, together with interest; (4) an order 
imposing such costs of any proceeding as are deemed fair and appropriate under  
the circumstances in accordance with NASD Rule 8330; and (5) an order imposing  
any other fitting sanction. The Respondents have indicated that they intend     
vigorously to contest the allegations. A hearing has not yet been scheduled and 
there have been no findings of fact or violations of law in this case. See "Risk
Factor"-"Possible Adverse Effect on Liquidity and Price of the Company's        
Securities Due to SEC Investigation and NASD Complaint" and "Underwriting."     

  POSSIBLE ADVERSE EFFECT ON LIQUIDITY AND PRICE OF THE COMPANY'S SECURITIES
DUE TO SEC INVESTIGATION AND NASD COMPLAINT.  The Company has been advised that 
in the event a public market for the Company's                                  

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securities should develop, of which no assurances can be given, the             
Representative intends to make a market in the Company's Units and components   
thereof following the Offering in the over-the-counter market, subject to       
compliance with Regulation M of the Exchange Act. An unfavorable resolution of  
the SEC investigation and/or NASD complaint concerning the sales and trading    
activities and practices of the Representative could have the effect of limiting
or curtailing the Representative's ability to make a market in the Company's    
securities in which case the market for and liquidity of the Company's          
securities may be adversely affected. See "Underwriting" and "Risk Factor-No    
Prior Public Market/Market Volatility."                                         

  IMMEDIATE AND SUBSTANTIAL DILUTION TO PUBLIC INVESTORS.  The Offering will
result in an immediate and substantial dilution of the public's investment in   
the Company because the $1.37 adjusted net tangible book value per share of the 
Common Stock upon the completion of the Offering will be $4.63 per share (77%)  
less than the $6.00 per share offering price of the share of Common Stock       
without giving any value to the Class A Warrant included in the Unit. See       
"Dilution."                                                                     

RECENT SALES OF SECURITIES.  Recently the Company entered into certain  
transactions pursuant to which the Company issued and sold Series B Preferred   
Stock (which is convertible into Common Stock on a one-for-one basis commencing 
any time after the Company has achieved pre-tax earnings of at least $500,000   
during any fiscal year) and securities convertible into Common Stock and Class A
Warrants at prices per share substantially below the initial offering price of  
the Company's securities. These transactions can be summarized as follows: On   
December 8, 1997, the Company sold 1,100,000 shares of Series B Preferred Stock 
to Duncan Hill in exchange for Duncan Hill's assumption of $300,000 of          
indebtedness owing to Kids Stuff equivalent to $.27 per share of Common Stock on
an as converted basis. The Series B Preferred Stock was recorded at an estimated
fair value of $1,100,000. See "Certain Transactions." On January 23, 1998, the  
Company issued a Convertible Note to the Bridge Lender in the principal amount  
of $100,000 and a Non-Convertible Note to the Bridge Lender in the principal    
amount of $100,000 in connection with a $200,000 loan to the Company. Upon the  
completion of the offering, the Convertible Note automatically converts into    
400,000 shares of the Company's Common Stock (and 1,400,000 Class A Warrants)   
equivalent to $.25 per share of Common Stock without attributing any value to   
the Class A Warrants, which price is substantially below the public offering    
price of the Company's Common Stock (i.e. $6.00 per share without attributing   
any value to the Class A Warrants included in the Units). The Non-Convertible   
Note is due and payable upon the completion of the Offering. See "Use of        
Proceeds" and "Selling Security Holders."                                       

    LIMITATION ON DIRECTOR LIABILITY.  As permitted by Delaware corporation law,
the Company's Certificate of Incorporation limits the liability of Directors to 
the Company or its stockholders to monetary damages for breach of a Director's  
fiduciary duty except for liability in certain instances. As a result of the    
Company's charter provision and Delaware law, stockholders may have a more      
limited right to recover against Directors for breach of their fiduciary duty.  
See "Management-Limitation of Directors' Liability and Indemnification Matters."

    NO CASH DIVIDENDS TO HOLDERS OF COMMON STOCK.  The Company has not paid cash
dividends on its Common Stock and does not anticipate paying cash dividends in  
the foreseeable future. The Company intends to retain future earnings, if any,  
to finance its growth. Notwithstanding the foregoing, the Company intends to pay
cash dividends to the holders of the Company's Series B Preferred Stock. See    
"Description of Securities" and "Dividend Policy."                              

CERTAIN IMPLICATIONS OF TRADING-OVER-THE-COUNTER; "PENNY STOCK"         
REGULATIONS.  The Representative has applied and the Company expects the        
Representative to receive approval for the quotation of the Company's Units,    
Common Stock and Class A Warrants on the Over-the-Counter ("OTC") Electronic    
Bulletin Board, although no assurances can be given in this regard. An investor 
may find it more difficult to dispose of, or to obtain quotations as to the     
price of, the Company's securities trading over-the-counter than had the Company
qualified for its securities to be listed for quotation on a national securities
exchange or the National Association of Securities Dealers Automated Quotation  
System ("NASDAQ").                                                              

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    The Securities and Exchange Commission has adopted "penny stock" regulations
which applies to securities traded over-the-counter. These regulations generally
define "penny stock" to be any equity security that has a market price of less  
than $5.00 per share or a warrant that has an exercise price of less than $5.00 
per share or an equity security of an issuer with net tangible assets of less   
than $2,000,000 as indicated in audited financial statements, if the corporation
has been in continuous operations for at least three years. Subject to certain  
limited exceptions, the rules for any transaction involving a "penny stock"     
require the delivery, prior to the transaction, of a risk disclosure document   
prepared by the Commission that contains certain information describing the     
nature and level of risk associated with investments in the penny stock market. 
The broker-dealer also must disclose the commissions payable to both the broker-
dealer and the registered representative and current quotations for the         
securities. Monthly account statements must be sent by the broker-dealer        
disclosing the estimated market value of each penny stock held in the account or
indicating that the estimated market value cannot be determined because of the  
unavailability of firm quotes. In addition, the rules impose additional sales   
practice requirements on broker-dealers who sell such securities to persons     
other than established customers and institutional accredited investors         
(generally institutions with assets in excess of $5,000,000). These practices   
require that, prior to the purchase, the broker-dealer determined that          
transactions in penny stocks were suitable for the purchaser and obtained the   
purchaser's written consent to the transaction. If the Company's securities     
trade below $5.00 per security after the Offering, they will be a penny stock   
unless the Company has audited financial statements demonstrating net tangible  
assets of at least $2,000,000. Consequently, the "penny stock" rules may        
restrict the ability of broker-dealers to sell the Company's securities and may 
affect the ability of purchasers in the Offering to sell the Company's          
securities in the secondary market.                                             

ARBITRARY DETERMINATION OF OFFERING PRICE.  The initial public offering 
price of the Units and the exercise price and other terms of the Warrants have  
been arbitrarily determined by the Company and the Representative and do not    
necessary bear any relationship to the assets, book value or net worth of the   
Company or any other recognized criteria of value. Accordingly, such prices     
should not be considered an indication of the Company's actual value. See       
"Underwriting."                                                                 

REPRESENTATIVE'S INFLUENCE ON THE MARKET; RESTRICTIONS ON MARKET MAKING 
ACTIVITIES DURING WARRANT SOLICITATION.  The Representative intends to make a   
market in the Company's Units, Common Stock and Class A Warrants following the  
Offering, although it is not obligated to do so and there can be no assurance   
that a public market will develop. The Representative has advised the Company   
that it anticipates that other broker dealers also will make a market in the    
Company's securities, although no assurance can be given that this will be the  
case. To the extent that the Representative acts as market maker in the         
Company's securities, there may be dominating influences in that market. The    
price and liquidity of the securities may be affected by the degree, if any, of 
the Representative's participation in the market, because a significant portion 
of those securities may be sold to customers of the Representative. Such        
customers may subsequently engage in transactions for the sale or purchase of   
the Company's securities through or with the Underwriter. In the event that     
market making activities are commenced by the Underwriter, there is no          
obligation for it to continue those activities. (See "Risk Factors--Possible    
Adverse Effect on Liquidity and Price of the Company's Securities Due to SEC    
Investigation and NASD Complaint.")                                             

The Representative has the right to act as the Company's sole agent in  
connection with any future solicitation of Warrant Holders to exercise their    
Class A Warrants. Unless granted an exemption by the Securities and Exchange    
Commission from Regulation M promulgated under the Exchange Act, the            
Representative will be prohibited from engaging in any market-making activities 
with regard to the Company's securities until the later of the termination of   
such solicitation activity or the termination (by waiver or otherwise) of any   
right that the Representative may have to receive a fee for soliciting the      
exercise of the Class A Warrants. Such limitation could impair the liquidity and
market prices of the Common Stock and Class A Warrants. See "Underwriting."     

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   LIMITS ON SECONDARY TRADING.  The Company will make application to register
or has or will seek to obtain an exception from registration to offer the Units 
and intends to conduct its selling efforts in Colorado, Connecticut, Delaware,  
District of Columbia, Florida, Georgia, Hawaii, Illinois, Louisiana, New York,  
Rhode Island and Utah (the "Primary Distribution States"). Purchasers of the    
Units in the Offering must be residents of such jurisdictions. In addition, the 
Units, Common Stock and Class A Warrants will be immediately eligible for resale
in the secondary market, in the event that one does develop, in each of the     
Primary Distribution States and in the state of Pennsylvania. Purchasers of any 
of these securities in any secondary trading market which may develop must be   
residents of such jurisdictions. Several additional states will permit secondary
market sales of these securities (i) once or after certain financial and other  
information with respect to the Company is published in a recognized securities 
manual such as Standard & Poor's Corporation Records; (ii) after a certain      
period has elapsed from the date hereof; or (iii) pursuant to exemptions        
applicable to certain institutional investors. The Company intends to apply for 
listing in a recognized securities manual on or about the date of this          
Prospectus, although there can be no assurance that it will be accepted for such
listing. Purchasers of Units in the Offering and future purchasers of the       
Company's securities in the secondary market, in the event that one does        
develop, may be restricted or prohibited from re-selling the securities in      
particular states as a result of applicable blue sky laws. These restrictions   
may reduce the liquidity of the securities and including their market price.    

 UNDERWRITERS' UNIT PURCHASE OPTION.  In connection with the Offering, the
Company will sell the Underwriters an option to purchase 46,000 Units (the      
"Underwriters' Unit Purchase Option"). The Underwriters' Unit Purchase Option   
will be exercisable commencing one year from the date of this Prospectus and for
four years thereafter at an exercise price of $9.00 per Unit. For the life of   
the Underwriters' Unit Purchase Option, the holders thereof will have the       
opportunity to profit from a rise in the market price of the Common Stock and/or
the Warrants without assuming the risk of ownership. The Company may find it    
more difficult to raise additional capital if it should be needed for the       
business of the Company while the Underwriters' Unit Purchase Option is         
outstanding. At any time when the holders thereof might be expected to exercise 
them, the Company would probably be able to obtain additional capital on terms  
more favorable than those provided by the Underwriters' Unit Purchase Option.   
The Company has also agreed to register the Underwriters' Unit Purchase Option  
and the underlying securities covered thereunder in any future registration     
statement that the Company may file during the four-year exercise period of the 
Underwriters' Unit Purchase Option. This obligation could interfere with the    
Company's ability to obtain financing under any future registration statement   
filing. See "Underwriting."                                                     

    POTENTIAL ADVERSE EFFECT OF REDEMPTION OR EXERCISE OF WARRANTS.  The Class A
Warrants may be redeemed by the Company under certain circumstances. Should the 
Company provide a notice of redemption of the Class A Warrants, the holders     
thereof would be forced to either exercise the Class A Warrants at a time when  
it may be disadvantageous for them to do so, sell the Class A Warrants at the   
then current market price, or accept the redemption price, which will likely be 
substantially less than the market value of the Class A Warrants. In addition,  
the exercise of the Class A Warrants, may have an adverse effect on the market  
price of the Company's securities should a public trading market develop. Also, 
while the Class A Warrants are outstanding, the Company may find it more        
difficult to raise additional capital upon favorable terms because of the       
potential for the exercise of the Class A Warrants to be dilutive to future     
investors. See "Description of Securities."                                     

  UNREGISTERED SHARES ELIGIBLE FOR IMMEDIATE AND FOR FUTURE SALE.  As of the
date of this Prospectus, the Company's outstanding unregistered securities      
include 931,000 shares of the Company's Common Stock, 5,000,000 shares of the   
Company's Series A Preferred Stock, 1,100,000 shares of the Company's Series B  
Convertible Preferred Stock, and options to purchase 260,000 shares of the      
Company's Common Stock (collectively the "Restricted Securities"). The          
Restricted Securities are owned by Duncan Hill or the Company's directors and   
are "restricted securities" as that term is defined by Rule 144 of the          
Securities Act, and may only be sold in compliance with the provision of Rule   
144 unless otherwise registered by the Company. These stockholders may elect to 
sell some or all of these shares as soon as they are permitted to               

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do so. Ordinarily, under Rule 144, a person holding restricted securities for a 
period of one year may, every three months thereafter, sell in ordinary         
brokerage transactions or in transactions directly with a market maker, an      
amount of shares equal to the greater of one percent of the Company's then      
outstanding Common Stock or the average weekly trading volume in the same       
securities during the four calendar weeks prior to such sale. For non-affiliated
persons who own the Company's securities for at least two years, the            
aforementioned volume restrictions are not applicable to sales by such person.  
Furthermore, Duncan Hill and the directors of the Company have agreed with the  
Representative not to sell or otherwise transfer the Restricted Securities      
within 24 months of the date of this Prospectus unless earlier permitted by the 
Representative. The possible or actual future sales of the Restricted Securities
under Rule 144 may have an adverse effect on the market price of the Company's  
Common Stock should a public trading market develop for such shares. See "Shares
Eligible for Future Sale."                                                      

CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE 
CLASS A WARRANTS.  The Company will be able to issue shares of its Common Stock 
upon exercise of the Class A Warrants only if there is a then current prospectus
relating to the shares of Common Stock issuable upon the exercise of the Class A
Warrants under an effective registration statement filed with the Securities and
Exchange Commission, and only if such shares of Common Stock are qualified for  
sale or exempt from qualification under applicable state securities laws of the 
jurisdiction in which the various holders of the Class A Warrants reside.       
Although the Company has agreed to use its best efforts to meet such regulatory 
requirements, there can be no assurance that the Company will be able to do so. 
The Class A Warrants may be deprived of any value if a prospectus covering the  
shares of Common Stock issuable upon their exercise is not kept effective or    
replaced or if such shares of Common Stock are not or cannot be qualified or    
exempt from qualification in the jurisdictions in which the holders of the Class
A Warrants reside. See "Description of Securities--Warrants." As of the date of 
this Prospectus, the Company anticipates that its securities will be qualified  
for sale or exempt from qualification only in the Primary Distribution States.  
See "Risk Factors-- Limits on Secondary Trading."                               

    COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF SECURITIES BY SELLING
SECURITIES HOLDERS.  As more fully described under "Selling Security Holders," a
substantial number of securities have been registered for sale on behalf of     
certain affiliated and non-affiliated persons as Selling Security Holders. The  
Company will not receive any proceeds from the sale of securities by the Selling
Security Holdres. Accordingly, a substantial portion of the proceeds to be      
received from the sale of all of the registered securities will not be for the  
benefit of the Company. See "Selling Security Holders."                         

ANTI-TAKEOVER MEASURES.  The Company is subject to a Delaware statute   
regulating business combinations that may serve to hinder or delay a change in  
control of the Company, in addition to those matters relating to control of the 
Company discussed immediately, above. Also, pursuant to the Company's           
certificate of incorporation, the Company's Board of Directors may from time to 
time authorize the issuance of additional shares of preferred stock in one or   
more series having such preferences, rights and other provisions as the Board of
Directors may decide. Any such issuances of preferred stock could, under certain
circumstances, have the effect of delaying or preventing a change in control of 
the Company and may adversely affect the rights of the holders of the Company's 
Common Stock and the market for those shares. There are no other provisions,    
however, in the Company's certificate of incorporation or bylaws that would     
serve to delay, defer, or prevent a takeover of the Company. See "Description of
Securities."                                                                    

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USE OF PROCEEDS 

  The net proceeds to be received from the sale of the 460,000 Units offered
by the Company (after deducting underwriting discounts, a 3% non-accountable    
expense allowance and other estimated offering expenses) will be approximately  
$2,050,000 ($2,037,500 if the Underwriters' Over-Allotment option is exercised  
in full). The Company intends to use the net proceeds of the Offering over at   
least the next twelve months approximately as follows:                          

                                                        [Enlarge/Download Table]

                                                                  APPROXIMATE     APPROXIMATE  
                                                                   AMOUNT OF     PERCENTAGE OF 
                                                                  NET PROCEEDS   NET PROCEEDS  
                                                                  ------------  ---------------
                                                                                               
Inventory........................................................  $  800,000             39%  
Preferred Stock Dividend to Duncan Hill(1).......................     110,000              5   
Payment of Bridge Lender.........................................                              
Indebtedness(2)..................................................     102,000              5   
Marketing(4).....................................................     100,000              5   
Humidor Construction(3)..........................................     740,000             36   
Officers' Salary.................................................      50,000              2   
Working Capital(5)...............................................     148,000              8   
                                                                  ------------           ---   
      TOTAL......................................................  $2,050,000            100%  
                                                                  ------------           ---   
                                                                  ------------           ---   

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

(1) The Company has allocated approximately $110,000 to be paid to Duncan Hill. 
The $110,000 represents the first year's cash dividend on the Series B  
Preferred Stock. See "Description of Securities."                       

(2) The Company has also allocated $102,000 to be paid to the Bridge Lender, who
    is also a Selling Security Holder, in satisfaction of a non-convertible note
  (including accrued interest at the rate of 8% per annum) which becomes due
and payable upon the completion of the Offering. See "Bridge Financing."

(3) The Company intends to construct its own climate controlled warehouse in    
    which each Havana Group member would receive an allocated portion serving as
   such members personal humidor, capable of storing up to 50 boxes of cigars.
See "Business--Marketing."                                              

(4) See "Business--Marketing."                                                  

(5) The Company intends to use the funds allocated toward general working       
 capital purposes primarily for paying for the ongoing expenses of being a
   publicly held corporation and miscellaneous administrative expenses. In the
event that the Over-Allotment Option is exercised in full by the        
    Underwriters, working capital and the estimated net proceeds of the Offering
 will be reduced by $12,420 which represents the amount of the the expense
    allowance which the Company has agreed to pay for the benefit of the Selling
Unit Holder. See "Underwriting."                                        

BRIDGE FINANCING                                                                

 On January 23, 1998, the Company raised $200,000 in bridge financing from
ARO Trust #1, 1960 Trust (Linda Gallenberger, Trustee), a non-affiliated        
investor, (the "Bridge Lender"). In exchange for the Bridge Lender making such  
loan, the Company issued to the Bridge Lender a non-convertible note due the    
earlier of the completion of the Offering or December 31, 1998 in the principal 
amount of $100,000 (the "Non-Convertible Note") and a convertible note in the   
principal amount of $100,000 due December 31, 1998 (the "Convertible Note"). The
Convertible Note and Non-Convertible Note are collectively referred to as the   
"Notes." Each Note bears interest at the rate of eight (8%) percent per annum.  
The Convertible Note automatically converts into 400,000 shares of the Company's
Common Stock and 1,400,000 Class A Warrants upon the consummation of the        
Offering. The 1,400,000 Class A Warrants are identical to the                   

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Class A Warrants offered hereby. The proceeds of the bridge offering were used  
by the Company to pay certain expenses in connection with the Offering and to   
increase working capital.                                                       

  The Registration Statement, of which this Prospectus is a part, covers the
sale of the 400,000 shares of the Company's Common Stock and 1,400,000 Class A  
Warrants (and the exercise of the Class A Warrants by the transferees of the    
Bridge Lender) that will be acquired by the Bridge Lender pursuant to the       
conversion of the Convertible Note. See "Selling Security Holders."             

DIVIDEND POLICY 

The Company currently intends to retain any earnings to finance the     
development and expansion of the Company's business and does not anticipate     
paying any cash dividends on its Common Stock in the foreseeable future,        
although it intends to pay cash dividends to holders of the Series B Preferred  
Stock. The declaration and payment of cash dividends by the Company are subject 
to the discretion of the Board of Directors of the Company. Any future          
determination to pay cash dividends will depend on the Company's results of     
operations, financial condition, capital requirements, contractual restrictions 
and other factors deemed relevant at the time by the Board of Directors. 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 Series Preferred Stock.                                                     

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DILUTION

    The net tangible book value per share of the Company as of December 31, 1997
was approximately $.40 per share of Common Stock. Net tangible book value per   
share is determined by dividing the tangible net worth of the Company (tangible 
assets less all liabilities) by the total number of outstanding shares of Common
Stock (1,000,000 at December 31, 1997). The Company's tangible assets consists  
of all of its balance sheet assets except for intangible assets which consists  
of customer lists and deferred catalog costs. After giving effect to the sale by
the Company of 460,000 Units and the receipt of the net proceeds therefrom and  
the conversion of the Convertible Note into 400,000 shares of Common Stock, the 
adjusted net tangible book value per share of the Company as of December 31,    
1997 would have been approximately $1.37. This represents an immediate increase 
in the adjusted net tangible book value per share of $0.97 to existing Common   
Stockholders and an immediate dilution (the difference between the price to the 
public per share of Common Stock and the adjusted net tangible book value per   
share of Common Stock after the Offering) in the adjusted tangible book value of
$4.63 per share of Common Stock (representing a dilution percentage of          
approximately 77%)to new investors (assuming for this discussion that the share 
of Common Stock comprising a $6.00 Unit is valued at $6.00 per share, and the   
Class A Warrant included in the Unit has no value).                             

The following table illustrates this per share of Common Stock dilution:

                                                                [Download Table]
                                                                                   
The initial price of a share of Common Stock paid by new                           
  investors...................................................                $6.00

Adjusted net tangible book value per share of Common Stock                         
  before the Offering.........................................     $0.40           

Increase in adjusted net tangible book value per share of                          
  Common Stock attributable to new investors..................      0.97           
                                                               ---------           

Adjusted net tangible book value per share of Common Stock                         
  after the Offering..........................................                 1.37
                                                                          ---------

Dilution in adjusted net tangible book value per share of                          
  Common Stock to new investors...............................                $4.63
                                                                          ---------
                                                                          ---------

 The following table summarizes, as of the completion of the Offering, the
differences between existing stockholders and new investors with respect to the 
number of shares of Common Stock purchased from the Company and the total and   
average cash consideration paid per share.                                      

                                                        [Enlarge/Download Table]

                                                          APPROXIMATE                       APPROXIMATE                 
                                                          PERCENTAGE      TOTAL CASH       PERCENTAGE OF       AVERAGE  
                                              SHARES       OF TOTAL      CONSIDERATION         TOTAL          PRICE PER 
                                            PURCHASED      SHARES %            $          CONSIDERATION %      SHARE $  
                                            ----------  ---------------  -------------  -------------------  -----------
                                                                                                                        

Public Stockholders........................    460,000            25        2,760,000               93             6.00 

Present Stockholders (1)...................  1,400,000            75          210,000                7              .15 
                                                                                                   ---                  

Total......................................  1,860,000           100        2,970,000              100                  
                                            ----------           ---     -------------             ---                  
                                            ----------           ---     -------------             ---                  

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

(1) Upon the completion of the Offering, the Convertible Note in the principal  
  amount of an aggregate of $100,000 will automatically convert into 400,000
  shares of the Company's Common Stock and 1,400,000 Class A Warrants. These
shares, but not the shares of Common Stock underlying the warrants, are 
included as owned by present stockholders.                              

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  The foregoing does not include the following: (i) 920,000 shares of Common
Stock issuable upon the exercise of the Class A Warrants included in the Units  
offered hereby; (ii) options to purchase 260,000 shares of Common Stock owned by
certain directors of the Company; (iii) warrants to purchase 138,000 shares of  
Common Stock owned by the Selling Unit Holder and warrants to purchase 200,000  
shares of Common Stock owned by Miller, which warrants upon the completion of   
the Offering automatically convert into warrants identical to the Class A       
Warrants; (iv) 1,400,000 shares of Common Stock issuable upon the exercise of   
1,400,000 Class A Warrants attributable to a Selling Security Holder; (v)       
1,100,000 shares issuable upon conversion of the Series B Preferred Stock; and  
(vi) 138,000 shares of Common Stock issuable upon exercise of the Underwriters' 
Unit Purchase Option and underlying warrants.                                   

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CAPITALIZATION

The following table sets forth, as of December 31, 1997, (i) the actual 
capitalization of the Company, and (ii) the pro forma capitalization of the     
Company, including the issuance of 400,000 shares of Common Stock and 1,400,000 
Class A Warrants to the Selling Security Holder upon conversion of the          
Convertible Note and the sale of 460,000 Units offered hereby and the receipt of
the estimated net proceeds therefrom. The table below should be read in         
conjunction with the financial statements of the Company and notes thereto      
included elsewhere in the Prospectus.                                           

                                                        [Enlarge/Download Table]

                                                                                           DECEMBER 31, 1997      
                                                                                      --------------------------- 
                                                                                                                  
                                                                                                         PRO      
                                                                                         ACTUAL       FORMA(1)    
                                                                                      ------------  ------------- 
Stockholders' Equity:                                                                                             

Common Stock, $.001 par value, 25,000,000 shares authorized, 1,000,000 shares issued                              
  and outstanding, 1,860,000 shares issued and outstanding pro forma................. $      1,000  $       1,860 
Series A Preferred Stock, $.001 par value, 10,000,000 shares authorized, 5,000,000                                
  shares issued and outstanding actual, and pro forma................................        5,000          5,000 

Series B Convertible Preferred Stock, $.001 par value, 10,000,000 shares authorized,                              
  1,100,000 shares issued and outstanding actual, and pro forma......................        1,100          1,100 

Additional Paid-in-capital...........................................................    1,092,900      6,591,993 
Retained Earnings (deficit)..........................................................     (176,887)    (3,528,887)
                                                                                      ------------  ------------- 
      Total Stockholders' Equity..................................................... $    923,113  $   3,071,066 
                                                                                      ------------  ------------- 
                                                                                      ------------  ------------- 

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

(1) Does not include the following: (i) 920,000 shares of Common Stock issuable 
upon the exercise of the Class A Warrants included in the Units offered 
hereby; (ii) options to purchase 260,000 shares of Common Stock owned by
   certain directors of the Company; (iii) warrants to purchase 138,000 shares
 of Common Stock owned by the Selling Unit Holder and warrants to purchase
   200,000 shares of Common Stock owned by Mr. Miller, which warrants upon the
   completion of the Offering automatically convert into warrants identical to
 the Class A Warrants; (iv) 1,400,000 shares of Common Stock issuable upon
the exercise of 1,400,000 Class A Warrants attributable to a Selling    
    Security Holder; (v) 1,100,000 shares issuable upon conversion of the Series
B Preferred Stock; and (vi) 138,000 shares of Common Stock issuable upon
   exercise of the Underwriters' Unit Purchase Option and underlying warrants.

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SELECTED FINANCIAL DATA 

    Set forth below are the selected financial data of the Company as of and for
the years ended December 31, 1995, 1996 and 1997. This selected financial data  
as of and for the years ended December 31, 1995, 1996 and 1997 has been derived 
from the historical financial statements of the Company, which include the      
financial statements of its predecessor, Carey, and which have been audited by  
Hausser +Taylor LLP, whose report with respect to such financial statements     
appears elsewhere in the Prospectus. Also set forth below are (i) adjusted      
selected financial data for the year ended December 31, 1997, which data has    
been derived from the Company's historical financial statements included        
elsewhere in the Prospectus and reflects the completion of a $200,000 bridge    
financing on January 23, 1998 and (ii) the pro forma financial statements which 
give effect to the sale of 460,000 Units offered hereby and the automatic       
conversion of the Convertible Note upon the completion of the Offering into a   
total of 400,000 shares and 1,400,000 Class A Warrants. The selected financial  
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" as well as the Company's         
historical financial statements and the related notes, included elsewhere in the
Prospectus.                                                                     

                                                        [Enlarge/Download Table]

                                                                                 YEAR ENDED DECEMBER 31,          
                                                                         ---------------------------------------- 
                                                                                                                  
                                                                             1995          1996          1997     
                                                                         ------------  ------------  ------------ 
Statement of Operational Data:                                                                                    
  Net Sales............................................................. $  1,668,927  $  1,656,316  $  1,427,574 
  Net Loss..............................................................      (64,626)     (115,523)      (61,772)
  Net Loss per common share............................................. $       (.06) $       (.12) $       (.06)
  Weighted average number of shares outstanding during the period(1)....    1,000,000     1,000,000     1,000,000 

                                                        [Enlarge/Download Table]

                                                                                   DECEMBER 31, 1997             
                                                                      -------------------------------------------
                                                                                                                 
                                              1995          1996         ACTUAL     AS ADJUSTED(2)  PRO FORMA(3) 
                                          ------------  ------------  ------------  --------------  -------------
Balance Sheet Data:                                                                                              
  Total Assets........................... $  1,557,547  $  1,550,754  $  1,240,228   $  1,440,228    $ 3,388,181 
  Working Capital........................      229,947       153,130       335,747        435,747      2,483,700 
  Total Liabilities......................      756,639       865,369       317,115        417,115        317,115 
  Stockholder's Equity...................      800,908       685,385       923,113      1,023,113      3,071,066 

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

(1) Reflects the reincorporation and recapitalization of Carey in Delaware. "The
Company and its Parent--the Reincorporation."                           

(2) Reflects the completion of $200,000 of bridge financing. See "Management's  
 Discussion and Analysis of Financial Condition and Results of Operation,"
"Use of Proceeds--Bridge Financing" and "Certain Transactions."         

(3) Reflects the sale of 460,000 Units offered hereby, and the receipt of the   
    net proceeds and repayment of $102,000 including estimated accrued interest.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

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

OVERVIEW                                                                        

   The Company currently derives its revenues from three sources; retail sales
from the Smokeshop, direct mail of catalogs and from the operation of its Carey 
Tobacco Club. During the year ended December 31, 1997, the Company mailed       
389,540 catalogs which generated sales of $1,097,670, approximately 74% of total
gross revenue. Carey Tobacco Club, a monthly program of tobacco shipments that  
supply pipe tobacco to individual Club members, generated $368,009 in gross     
sales, representing approximately 25% of total gross revenue. The Smokeshop was 
opened on December 8, 1997 and generated sales of $8,781 for remainder of       
December 1997.                                                                  

RESULTS OF OPERATIONS                                                           

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996.  

  Total net sales for the year ended December 31, 1997 decreased $228,742 or
13.8%, to $1,427,574, compared with $1,656,316 during the year ended December   
31, 1996. Net sales include sales from merchandise, shipping and handling       
charges and mailing list rental. This decrease was largely attributable to two  
items. First, sales from tobacco club members decreased $251,870, or 40.6%, from
$619,879 to $368,009 for the year ended December 31, 1996 and 1997,             
respectively. Carey Tobacco Club membership decreased from approximately 2,530  
at December 31, 1996 to approximately 2,070 at December 31, 1997. Second the    
Company operated a retail outlet store, "Carey's Smokeshop," until October 1996.
Net sales through December 31, 1996 were $57,389, compared to sales of $8,781   
for the year ended December 31, 1997. The Company has decided to terminate the  
outlet store concept and concentrate on an upscale retail store, The Havana     
Group (the "Smokeshop"). The Company recently opened the Smokeshop during       
December 1997 in an off-mall location in Canton, Ohio.                          

The above mentioned decreases were partially offset by an increase in   
catalog sales. Net sales attributable to the catalog increased 7.3%, from       
$979,048 for the year ended December 31, 1996, to $1,050,784 for 1997. This     
increase came from an increase in net revenue per catalog mailed of $.49, from  
$2.19 to $2.68 for the year ended December 31, 1996 and 1997, respectively.     

   Cost of sales as a percentage of net sales decreased from 57.7% for 1996 to
54.2% for 1997. The largest factor for this was the decrease in merchandise     
costs, as a percentage of net sales. Merchandise costs decreased from 36.9% to  
33.3% of net sales, from 1996 to 1997. The Company attributes this decrease to  
increased prices, which it believes helped produce increased margins.           

Selling expenses, as a percentage of net sales, decreased from 22.6% for
1996 to 22.2% for 1997. General and administrative expenses were $398,952, or   
27.9% of net sales, for the year ended December 31, 1997, and $450,876, or 27.2%
of net sales, for the same period of 1996. This dollar decrease is attributable 
to a decrease in the allocation from the affiliate handling administrative      
functions for the Company. General and administrative expenses for 1996 were    
incurred by Duncan Hill, and allocated to the Company and Kid Stuff based on the
percentage of assets of each operating subsidiary to the total assets for both  
operating subsidiaries, exclusive of the assets of Duncan Hill. For 1996, the   
Company's and Kid Stuff's allocation was 31% and 69%, respectively, of Duncan   
Hill's total general and administrative expenses. Effective January 1, 1997, the
Company began purchasing administrative functions from Kids Stuff. General and  
administrative expenses incurred by Kids Stuff were allocated to the Company on 
a pro rata basis determined by the respective percentage of total assets of the 
Company and Kids Stuff. For the six months ended June 30, 1997, the Company's   
allocation was 33% of the total general and administrative                      

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expenses. For the six months ended December 31, 1997, the Company's allocation  
was 21% of the consolidated total general and administrative expenses, due to   
the acquisition of a catalog by Kids Stuff. See "Certain Transactions" and "The 
Company and Its Parent."                                                        

 Net loss for the year ended December 31, 1997 was $61,772, or 4.3% of net
sales. Net loss for 1996 was $115,523, or 7.0% of net sales. This improvement is
attributable to decreased cost of sales.                                        

LIQUIDITY AND CAPITAL RESOURCES                                                 

At December 31, 1997, the Company had a deficit in retained earnings of 
$176,887, compared to retained earnings of $684,885 at December 31, 1996. This  
resulted from a net loss of $61,772 for the year ended December 31, 1997 and an 
$800,000 adjustment to estimated fair value of 1,100,000 shares of Series B     
Preferred stock issued to Duncan Hill.                                          

 For the year ended December 31, 1997, the impact of the operating loss on
the Company's cash position was increased by changes in working capital which   
effected operating activities. The operating activities consumed $224,327 in    
cash through increases in accounts receivable, inventories, deferred catalog    
expenses and prepaid expenses, but provided $37,104 from an increase in accounts
payable, customer advances and other accrued expenses. The net effect of these  
changes and non-cash charges of $39,780 relating to depreciation and            
amortization, when added to the Company's net loss, resulted in net cash used by
operating activities of $209,215.                                               

 For the year ended December 31, 1996, the impact of the operating loss on
the Company's cash position was offset by the use of cash of $5,422 through     
increases in deferred catalog expense and an increase in prepaid expenses, but  
provided $113,978 in cash through a decrease in accounts receivable, inventories
and an increase in accounts payable, customer advances and other accrued        
expenses. The net effect of these changes and non-cash charges of $38,706       
relating to depreciation and amortization resulted in cash provided by operating
activities was $31,739.                                                         

For the year ended December 31, 1997, the Company's financing activities
provided $378,322 in cash, from changes in current obligations to/from          
affiliates, and used $500 for the return of additional capital contribution to  
Duncan Hill for net cash used by financing activities of $377,822. The Company's
investing activities used $94,891 in investments in fixed assets during 1997.   
For 1996, the Company's financing activities used $35,165 in cash.              

  For the year ended Decmeber 31, 1997, the combined effect of net cash used
by operating activities of $209,215, net cash provided by financing activities  
of $377,822, and cash used by investing activities of $94,891 resulted in an    
increase in cash of $73,716 from $5,895 at December 31, 1996 to $79,611 at      
December 31, 1997. For the year ended December 31, 1996, the combined effect of 
net cash provided by operating activities of $31,739, and net cash used by      
financing activities of $35,165 decreased cash from $9,321 to $5,895 at December
31, 1996.                                                                       

   The Company has no credit facility at the current time. However, the assets
of the Company are pledged as collateral along with the assets of Duncan Hill to
guarantee an $800,000 bank line of credit in the name of Kids Stuff. Kid Stuff's
bank line of credit had a balance of $732,000 at April 15, 1998. The line of    
credit is for an open term, payable on demand. The repayment of the facility is 
guaranteed by Miller and the Company and is not terminable without the          
line-of-credit being paid in full. Interest is charged at the rate of 1% over   
prime. It is the policy of the bank to review the credit facility annually, and 
to require that the Company maintain a zero balance on the credit line for a    
period of thirty consecutive days sometime during the course of each year. The  
bank agreed to waive the "zero balance" required for the 1997 loan year ended   
June 30, 1997, because Kids Stuff's current cash flow would not allow it to     
comply before then.                                                             

In December 1997, the Company's predecessor, Carey, effected a          
reincorporation in Delaware and recapitalized the Company by replacing the 100  
shares of no par value Carey common stock owned by the Company's parent, Duncan 
Hill with 1,000,000 shares of the Company's $.001 par value Common Stock        

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and 5,000,000 shares of Series A Preferred Stock (and 138,000 warrants which    
automatically, upon the completion of the Offering, convert into Class A        
Warrants identical to those sold in the Offering) through a stock split and     
stock dividend.                                                                 

The Company also issued to Duncan Hill 1,100,000 shares of Series B     
Convertible Preferred Stock in exchange for Duncan Hill's assumption of a       
$300,000 liability due to Kids Stuff. The Series B Convertible Preferred shares 
are convertible at the option of the holder into the Company's Common Stock at  
any time after the Company's pre-tax earnings reach $500,000 in any given       
calendar year on a one to one conversion basis. See "Certain Transactions" and  
"Description of Securities."                                                    

 On January 23, 1998, the Company raised $200,000 in bridge financing from
the Bridge Lender. The Company issued the Non-Convertible Note due the earlier  
of the completion of the Offering or December 31, 1998 in the principal amount  
of $100,000 and the Convertible Note in the principal amount of $100,000 due    
December 31, 1998. Each Note bears interest at the rate of eight (8%) percent   
per annum. The Convertible Note automatically converts into a total of 400,000  
shares of the Company's Common Stock and 1,400,000 Class A Warrants upon the    
consummation of the Offering. See "Use of Proceeds - Bridge Financing" and      
"Selling Security Holders." As a result of this financing, the Company will     
recognize a one time charge to earnings of approximately $3,350,000 in 1998. See
"Notes to Consolidated Financial Statements, Note 4E-Sale of Unregistered       
Securities."                                                                    

Effective January 1, 1998, the Company has an agreement with Kids Stuff 
whereby Kids Stuff provides administrative functions to the Company at an annual
cost of $206,100. Kids Stuff is also providing fulfillment services to the      
Company at a cost of $2.40 per order processed. The aforesaid $206,100 and $2.40
per order processed is based upon actual costs incurred by Kid Stuff in 1997.   
The Company is also obligated to pay 5% of 1998 pre-tax profits to Kids Stuff in
connection with these administrative and fulfillment services. See "The Company 
and its Parent" and "Certain Transactions."                                     

In October 1995, Statement of Financial Accounting Standards No. 123,   
Accounting for Stock-Based Compensation, was issued which establishes accounting
and reporting standards for stock-based compensation plans. This standard       
encourages the adoption of the fair value-based method of accounting for        
employee stock options or similar equity instruments, but continues to allow the
Company to measure compensation cost for those equity instruments using the     
intrinsic value-based method of accounting prescribed by Accounting Principles  
Board Opinion No. 25, Accounting for Stock Issued to Employees. Under the fair  
value-based method, compensation cost is measured at the grant date based on the
value of the award. Under the intrinsic value-based method, compensation cost is
the excess, if any, of the quoted market price of the stock at the grant date or
other measurement date over the amount the employee must pay to acquire the     
stock. The Company uses the intrinsic value-based method for stock-based        
compensation to employees. As a result, there will be no effect to the Company  
other than to require a pro forma footnote disclosure. See "Notes to            
Consolidated Financial Statements, Note 8--Fair Value of Stock Based            
Compensation."                                                                  

As of the date of this Prospectus, the Company has granted its three    
directors options to purchase an aggregate of 260,000 shares of the Company's   
Common Stock at an exercise price of $6.00 per share. These options contain     
provisions pursuant to which the exercise price will decrease based upon the    
Company's operating performance. The Company does not anticipate that these     
options will have any material impact on its future operations.                 

  In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" and SFAS No. 129, "Disclosure of Information About    
Capital Structure." SFAS 128 establishes new standards for computing and        
reporting earnings per share. SFAS No. 129 requires an entity to explain the    
pertinent rights and privileges of outstanding securities. The Company has      
adopted these new standards in the period ended December 31, 1997. All prior    
period earnings per share data have been restated for the adoption of SFAS 128. 
The effect of adoption was not material.                                        

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   In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which is effective for fiscal years beginning 
after December 15, 1997. SFAS No. 130 establishes new standards for reporting   
comprehensive income and its components. The Company expects that comprehensive 
income (loss) will not be materially different from net income (loss).          

   In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." SFAS No.  
131 changes the standards for reporting financial results by operating segments,
related products and services, geographic areas and major customers. The Company
must adopt SFAS No. 131 not later than December 31, 1998. Management believes   
that the effect of adoption will not be material.                               

THE COMPANY AND ITS PARENT

HISTORY OF DUNCAN HILL                                                          

   The Company's parent, Duncan Hill, was organized under Ohio law in 1977 for
the purpose of developing and marketing a designer line of smoking pipes,       
tobacco and accessories. Duncan Hill is a publicly held corporation controlled  
(approximately 68%) by William L. Miller, the Company's Chief Executive Officer.
In 1980, a Duncan Hill subsidiary, Highland Pipe Company, acquired the pipe     
manufacturing business of the Monarch Pipe Co., of Bristow, Oklahoma. In 1984,  
the business of E.A. Carey Co. of Chicago, a mail order supplier of smoking     
products, was purchased by Duncan Hill through its subsidiary, Carey.           

 Perfectly Safe, Inc. was formed by Duncan Hill in 1990 under Ohio law for
the purpose of publishing The Perfectly Safe Catalog, which was acquired from   
Jeanne E. Miller in January, 1990. Mrs. Miller purchased the Perfectly Safe     
Catalog in 1988 from the catalog's creator. In July, 1995, Perfectly Safe, Inc. 
began to publish its second catalog, Jeannie's Kids Club. Duncan Hill combined  
its children's operations into a separate subsidiary, Kids Stuff during 1996 and
acquired a third children's catalog in June 1997. Kids Stuff funded the         
acquisition with a public offering and is currently traded on the OTC Bulletin  
Board under the symbol "KDST."                                                  

    Prior to January 1, 1997, all fulfillment and administrative services of the
Company were performed and paid for by Duncan Hill which also provided similar  
services to its subsidiary, Kids Stuff. Fulfillment services included order     
taking, order processing, customer service, warehouse packing and delivery,     
telephone contracts and shipping contracts. Fulfillment services were charged to
the Company and Kids Stuff based on the actual cost. Administrative services    
included wages and salaries of officers, accounting, purchasing, executive and  
creative/marketing personnel. It also included, all leases, contracts, equipment
rentals and purchases, audit, legal, data processing, insurance and building    
rent and maintenance. The administrative costs were allocated by Duncan Hill to 
the Company and Kids Stuff based upon the percentage of assets for each         
operating subsidiary to the total assets for all operating subsidiaries. The    
percentages for 1996 were 31% to the Company and 69% to Kids Stuff.             

  During 1997, all administrative and fulfillment services were performed or
paid by Kids Stuff on behalf of the Company. All fulfillment services were      
contracted and paid by Kids Stuff and charged to the Company based on the actual
cost. All administrative costs were allocated between the Company and Kids Stuff
based upon the percentage of assets for each respective operating company to the
total assets for both operating companies with 33% charged to the Company for   
the period January 1, 1997 through June 30, 1997 and 21% charged to the Company 
for the period July 1, 1997 through December 31, 1997. Duncan Hill incurred     
certain other costs which included legal and outside accounting/auditing        
expenses. These costs were allocated to the Company and Kids Stuff based on the 
same method and percentages as described above.                                 

Effective January 1, 1998, the Company has an 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                              

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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 is also obligated to pay Kids Stuff an amount equal
to 5% of the Company's 1998 pre-tax profits as additional consideration for Kids
Stuff providing the Company with administrative and fulfillment services. In    
addition to the above, the Company also expects to incur additional             
administrative costs such as the salaries of the Company's Chief Executive      
Officer, legal, accounting, depreciation and amortization and tax expenses which
costs will be incurred by and paid for directly by the Company. See "Certain    
Transactions."                                                                  

THE REINCORPORATION                                                             

  Effective December 5, 1997, the Company succeeded to the Carey's Smokeshop
Catalog and pipe manufacturing business of Carey, a subsidiary of Duncan Hill,  
as a result of a reincorporation in which Carey was merged into and with its    
wholly-owned subsidiary, The Havana Group, Inc., the surviving corporation. In  
connection with the reincorporation, the Company issued Duncan Hill 1,000,000   
shares of Common Stock and assumed all of the liabilities of Carey.             

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BUSINESS

GENERAL                                                                         

The Company is a Delaware corporation engaged in the business of (i)    
operating a retail smokeshop in Canton, Ohio which primarily sells pipes, cigars
and smoking accessories; (ii) marketing pipes, tobaccos and related accessories 
directly to consumers through its 48 page full color catalog (the "Carey        
Smokeshop Catalog"); and (iii) providing a program of automatic periodic        
shipments of tobacco directly to consumers (the "Carey Tobacco Club"). The      
Company intends to create and develop a Cigar Club (the "Havana Group Direct")  
pursuant to which the Company will charge certain membership fees and offer     
certain cigar purchasing, warehousing and shipping services in return for       
membership, purchasing and shipping fees. The Company does not sell cigarettes. 
See "Use of Proceeds."                                                          

   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.                                                          

   The Company has one subsidiary, Monarch, which is a wholly owned subsidiary
of the Company. Monarch manufactures pipes which are exclusively sold by the    
Company. Monarch is located in Bristow Oklahoma and produces the Carey and      
Duncan Hill smoking pipes. 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 $6.00 to $9.50 per unit.     

STRATEGIES                                                                      

  The Company believes that its expertise in the marketing and merchandising
of smoking products and the recent introduction of the Smokeshop will provide   
the basis for future growth by use of the following strategies:                 

 DEVELOPMENT OF THE HAVANA GROUP DIRECT.  The Company plans to develop the
Havana Group Direct, a direct marketing cigar club. The Company would obtain    
membership inquiries through magazine and newspaper advertisements, and solicit 
memberships by offering services in return for an annual membership fee.        
Services would include providing individual humidor space for up to 50 boxes of 
cigars, a personalized buying service for the member's cigar preference, and a  
periodic newsletter of items of interest for cigar smokers. See "Marketing."    

THE SMOKESHOP.  The Company had operated a smokeshop named "Carey's     
Smokeshop" from 1984 to 1996 to maintain a retail presence and 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 pipes, cigars and smoking  
accessories (and is not limited to over-stock items) and intends to sell other  
product lines, including fine wines and imported beers. The Company has applied 
for a license to sell such liquor products and is currently waiting to receive  
such license. See "Other Regulatory Matters." The Company may expand the number 
of retail stores depending upon the success of its existing store and available 
external financing, if any.                                                     

MAINTAIN CAREY'S SMOKESHOP CATALOG.  The Company believes that Carey's  
Smokeshop Catalog provides a good initial revenue base. However, the Company    
believes that it must maintain and expand this customer base.                   

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MERCHANDISING                                                                   

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 20 design groups marketed as       
various series, such as "The Executive Collection" or "Carey Classic Series."   
Additionally, the Company offers other hand made imported smoking pipes in its  
catalog, generally at retail prices from $35.00 to $85.00 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 in this country. Carey offers 28    
tobacco blends in its current catalog, along with 23 different brands and sizes 
of cigars. Because of the composition of the catalog customer base, cigar sales 
are generally mid-range in the cigar market, with the most popular cigar the    
Carey Honduran bundle, which retails from $1.00 to $1.50 per cigar. Because of  
the upscale target market of the retail store, cigar sales range from $2.50 to  
$4.50 per cigar, with an average price of $2.75 per cigar with Arturo Fuente,   
the most popular cigar.                                                         

The Company intends to merchandise cigars for its Havana Group Direct   
marketing cigar club by offering its own private label "Havana Group" cigar,    
plus other well known and established brand names, such as "Arturo Fuente", "H. 
Upmann", "Dunhill", "Montecruz", "Partagas", "Punch", "Ashton", "Macanudo" and  
others. It is the Company's intent to price brand name cigars at full retail    
markups and then offer the club member a discount for purchases in box          
quantities for storage in their Havana Group personal humidor. Private label    
"Havana Group" cigars will be value priced to attract club members.             

MARKETING                                                                       

 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, 1997, Carey mailed 389,540 catalogs, which generated    
average gross revenues of $2.82 per catalog mailed. The catalog consists of 48  
full color pages, with approximately 77% offering pipes, tobaccos, and related  
accessories, approximately 17% offering cigars and cigar related accessories and
the remaining balance of the catalog offering various men's products.           

Carey 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 membership have been members in      
excess of five years. At December 31, 1997, Carey Tobacco Club had 2,070 active 
members who placed 20,122 orders during the year ended December 31, 1997, and   
generated $368,009 in gross sales in 1997 for the Company.                      

   The Company plans to create and develop the "Havana Group Direct," a direct
marketing cigar club. The Company would develop its member base using the same  
marketing methods it has historically used in the smaller pipe and tobacco      
business, namely using magazine and newspaper advertising to generate a Havana  
Group inquiry and then converting the inquiry to a membership using direct      
marketing techniques, including direct mail, video tapes, and telemarketing. The
Company has retained Simmons Market Research Bureau to identify advertising     
media containing cigar smokers of similar demographic characteristics. The      
Company believes that it can successfully generate Havana Group cigar club      
members on the aforementioned basis and has allocated $100,000 of the proceeds  
of the offering towards implementing this marketing plan. See "Use of Proceeds."

   The Company plans to offer its Havana Group Direct cigar club membership on
an annual fee basis, and to offer certain services in return for the membership 
fee. The Havana Group Direct would construct                                    

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its own climate-controlled warehouse, and each member would receive their       
personal humidor capable of storing up to 50 boxes of cigars within the Havana  
Group Direct humidified warehouse. The Havana Group Direct would encourage      
purchase and collection of fine cigars by each member, and distribute those     
cigars to the member in any requested quantity by first and second day air      
shipment. Each member would be invoiced for the purchase of the cigars and      
courier service. To encourage collection of fine cigars, Havana Group Direct    
would offer a personal buying service for any premium cigar desired by the      
individual member (however, the Company will not sell products made in Cuba).   
The product would be supplied from stock or, alternatively, would be sourced and
purchased for the member's account. Upon receipt, the cigars would be shipped to
the member or placed in the member's personal humidor for later distribution as 
requested. Havana Group Direct would identify this as "Concierge Level"         
services. The Company has allocated $740,000 of the proceeds of the Offering for
Humidor Construction. See "Use of Proceeds."                                    

   Havana Group Direct anticipates that all cigars cannot be supplied from its
own inventory, and that many requested brands will be subject to deliveries from
the major manufacturers. In cases where the requested cigars are not in stock at
the time of the member's request, Havana Group Direct will place the cigars on  
order for the member's account. The status of the order will be published       
monthly in The Havana Group Newsletter, along with the status of all cigars on  
order for the Havana Group Direct. Delivery information will be presented much  
in the same manner as futures are quoted in the Wall Street Journal, with       
brands, sizes, shapes, on-order, and available remaining quantities noted. In   
this manner, The Havana Group Direct member can purchase cigar future deliveries
for their own account. Additionally, The Havana Group Newsletter would contain  
items of information and interest regarding cigars and related products.        

  The Company had 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. It is the Company's intent to open additional      
smokeshops through Company owned and operated or franchise facilities depending 
upon the success of its current store and the availability of external          
financing, of which no assurances can be given in this regard. The Company      
believes that additional retail smokeshops can be readily developed in off-mall 
locations.                                                                      

    Any new retail outlets would offer product groups proven historically in the
smokeshop industry, and may add other product lines, such as fine wines and     
imported beers, depending upon the Company's ability to obtain all requisite    
liquor licenses. At its current location, the Company has determined the mix of 
product by taking proven product lines of smokeshops, and deleting certain      
product lines inconsistent with The Havana Group image. Such product lines      
dropped include domestic cigarettes, smokeless tobacco, candy, gum, snacks and  
greeting cards.                                                                 

CUSTOMER SERVICE AND TELEMARKETING                                              

The Company currently derives approximately 75% of its revenues through 
orders placed over the telephone and emphasizes 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 3 1/2% of 
sales. The Company purchases telemarketing services from its affiliate, Kids    
Stuff. See "Certain Transactions." Kids Stuff employed 35 full time and 15 part 
time employees at January 1, 1998. During 1996 and 1997, Kids Stuff processed   
over 708,497 telephonic customer orders, catalog requests and service           
requirements on behalf of the Company.                                          

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FULFILLMENT AND DELIVERY                                                        

The Company's fulfillment and delivery objective is to provide excellent
customer service within a low cost structure. The Company purchases its         
fulfillment operations from its affiliate, Kids Stuff. See "Certain             
Transactions." Kids Stuff's facility consist of 18,000 square feet of leased    
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 are individually recorded
and posted through the use of barcode scanners, so that sales records and credit
card deposits are electronically posted. Kids Stuff's fulfillment center        
processed over 588,605 shipments in 1996 and 1997.                              

INVENTORY/PURCHASING                                                            

The Company conducts its purchasing operations at its general offices in
Canton, Ohio. Each catalog contains approximately 326 products or stock keeping 
units (SKU's). 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                                                                

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 16% of the Company's catalog products. Other than Monarch, the    
Company currently has three vendors that supply more than 10% of its catalog    
products. These companies include Lane Limited (32.4%), Hollco-Rohr Co. (13.6%) 
and Consolidated Cigar Inc. (12.7%). 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 approximately 56 domestic vendors.   

SEASONALITY                                                                     

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.                        

The Company's limited experience with the Smokeshop has not afforded the
Company the opportunity to determine seasonality fluctuations for that segment  
of its business. However, the Company estimates a slight increase in fourth     
quarter sales due to traditional gift purchasing. Otherwise, the Company        
estimates a steady revenue flow from month to month.                            

DATA PROCESSING                                                                 

The Company currently does not have any data processing equipment. It   
currently relies upon Kids Stuff to provide data processing services. The       
Company is allocated its portion of data processing costs. See "Certain         
Transactions."                                                                  

COMPETITION                                                                     

  The Company believes that there are currently approximately 1,000 to 1,500
full line smoke shops in the United States. While certain retail smoke shops    
have adopted catalogs and mail order techniques as a method for creating        
additional revenue, the Company believes that the number of retailers involved  
in this area of distribution to be relatively small in number. The Company has  
identified three companies that are                                             

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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 three identified competitors, which include 800 JR Cigar,      
Thompson's Cigar and Fink 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 with many competitors having more  
experience and greater financial resources than the Company. No assurances can  
be given that the Company will be able to successfully compete in all aspects of
its business in the future.                                                     

TOBACCO INDUSTRY--GOVERNMENT REGULATIONS                                        

 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. A variety of bills relating to tobacco issues have been recently    
introduced in the United States Congress, including bills that, if passed,      
would: (i) curtail the advertising and promotion of all tobacco products and    
restrict or eliminate the deductibility of such advertising expenses; (ii)      
increase labeling requirements on tobacco products to include, among other      
things, addiction warnings and lists of additives and toxins; (iii) modify      
federal preemption of state laws to allow state courts to hold tobacco          
manufacturers liable under common law or state statutes; (iv) shift regulatory  
control of tobacco products at the federal level from the United States Federal 
Trade Commission (the "FTC") to the United States Food and Drug Administration  
(the "FDA") and require the tobacco industry to fund the FDA's oversight; (v)   
increase tobacco excise taxes; (vi) restrict the access to tobacco products by, 
among other things, banning the distribution of tobacco products through the    
mail, except for sales subject to proof of age; (vii) require licensing of      
retail tobacco product sellers; (viii) regulate tobacco product development; and
(ix) require tobacco companies to pay for healthcare costs incurred by the      
federal government in connection with tobacco related diseases. Although        
hearings have been held on certain of these proposals, to date, none of such    
proposals have been passed by Congress. Future enactment of such proposals or   
similar bills may have a material adverse effect on the Company's business,     
results of operations and financial condition.                                  

    In August 1996, the FDA determined that nicotine is a drug. Accordingly, the
FDA determined that it had jurisdiction over cigarettes and smokeless tobacco   
products, pursuant to the FDA determination that cigarette and smokeless tobacco
products are drug delivery devices used for the delivery of nicotine. Although  
certain legal challenges to the FDA's determination are pending, there can be no
assurance that such determination will not be upheld, nor that in the future,   
the FDA will not prevail in an attempt to extend such jurisdiction to cigars. In
addition, a majority of states restrict or prohibit smoking in certain public   
places and restrict sale of tobacco products (including cigars) to minors. Local
legislative and regulatory bodies have increasingly moved to curtail smoking by 
prohibiting smoking in certain buildings or areas or by requiring designated    
"smoking" areas. Individual establishments such as bars and restaurants have    
further prohibited pipe and cigar smoking even though other tobacco products are
permitted in such establishments. Further restrictions of a similar nature could
have a material adverse effect on the business, results of operations and       
financial condition of the Company. Numerous proposals have also been considered
at the state and local level restricting smoking in certain public areas.       

Federal law has required health warnings on cigarettes since 1965 and on
smokeless tobacco since 1986. Although no federal law currently requires that   
cigars carry such warnings, California has enacted laws requiring that "clear   
and reasonable" warnings be given to consumers who are exposed to chemicals     
determined by the state to cause cancer or reproductive toxicity, including     
tobacco smoke and several of its constituent chemicals. Similar legislation has 
been introduced in other states. In addition, effective January 1, 1998,        
smoking, including cigar smoking, has been banned by the State of California in 
all bars, taverns and clubs where food and alcohol is served. Other legislation 
recently introduced in a state would, if enacted, require warning labels on     
cigar boxes. Certain states have enacted legislation which require cigar        
manufacturers to provide information on the levels of certain substances in     
their cigars to these states on an annual basis. There can be no assurance that 
such legislation or more restrictive legislation will not                       

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be passed by one or more states in the future. Consideration at both the federal
and state level also has been given to consequences of second hand smoke. There 
can be no assurance that regulations relating to second hand smoke will not be  
adopted or that such regulations or related litigation would not have a meterial
adverse effect on the Company's business, results of operations and financial   
condition.                                                                      

    Increased cigar consumption and the publicity such increase has received may
increase the risk of additional regulation of cigars. Increased publicity may   
prompt research studies by various agencies such as the National Cancer         
Institute, the American Cancer Society, and others. Such research can, by its   
ultimate content, influence additional regulation of cigars by federal, state,  
and local regulatory bodies. There can be no assurance that any such legislation
or regulation would not have a material adverse effect on the Company's         
business, results of operations and financial condition.                        

 On a national level, Senate Bill 1415 has been introduced by Senator John
McCain. This Bill proposes the comprehensive regulation of tobacco products, but
at the time of its introduction, it specifically excluded the regulation of     
cigars and pipe tobacco. However, the Bill does contain a provision requiring   
the Secretary of Health and Human Services to monitor the use of cigars and pipe
tobacco by underage individuals. The Secretary is required to notify Congress   
"if the Secretary determines that a decrease in underage use of tobacco products
resulting from the enactment of Senate Bill 1415 has produced an increase in    
underage use of pipe tobacco and cigars." Presumably, at that time, Congress    
would consider expanding the definition of regulated products to include cigars 
and pipe tobacco.                                                               

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 FTC Chairman indicated that warning labels might be justified in the future.

TOBACCO INDUSTRY LITIGATION                                                     

The tobacco industry has experienced and is experiencing significant    
health-related litigation. Private plantiffs in such litigation are seeking     
compensatory and, in some cases, punitive damages, for various 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. Over 40 states have filed lawsuits against the major United      
States cigarette manufacturers to recover billions of dollars in damages,       
primarily costs of medical treatment of smokers. On June 20, 1997, the Attorney 
General of 40 states and several major cigarette manufacturers announced a      
proposed settlement of the lawsuits filed by these states (the "Proposed        
Settlement"). The Proposed Settlement, which will require Federal legislation to
implement, is complex and may change significantly or be rejected. The Proposed 
Settlement would significantly change the way in which cigarette companies and  
tobacco companies do business. Among other things, the tobacco companies would  
pay hundreds of billions of dollars to the various states; the FDA could        
regulate nicotine as a "drug" and tobacco products as "drug delivery devices;"  
all outdoor advertising, sports event advertising and advertising on non-tobacco
products would be banned and certain class action lawsuits and punitive damage  
claims against tobacco companies would be prohibited. Since changes to the      
Proposed Settlement may be made, or the Proposed Settlement may not be adopted  
by Federal Legislation, or some of the United States cigarette manufacturers may
withdraw their participation from the Proposed Settlement, the potential impact 
of the Proposed Settlement on the cigar industry in general and the Company in  
particular is uncertain. There can be no assurance that similar litigation will 
not be brought against cigar manufacturers and distributors. 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 State of Florida has entered into a separate settlement agreement
with major United States cigarette manufacturers with respect to tobacco        
products, including roll-your-own and little cigars. This settlement agreement  
provides, in part, for a ban on billboard and transit advertising, significant  
document disclosure by the settling cigarette companies, billions of dollars in 
settlement payments and certain                                                 

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adjustments pending the resolution of the Proposed Settlement. The State of     
Mississippi has announced a separate settlement agreement with major cigarette  
manufacturers which provides for a payment of $4.0 billion, however, if the     
Proposed Settlement is approved the Proposed Settlement will supersede the      
Mississippi settlement. The recent increase in the sales of cigars and the      
publicity of such increases may increase the probabilty of legal claims.        

PRODUCT LIABILITY INSURANCE                                                     

   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, the Company's parent, Duncan Hill, has maintained, for itself and its     
subsidiaries, 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 one year and are currently in effect through September 17, 1998.    
Although the Company believes that its present insurance coverage is sufficient 
for its current level of business operations, there is no assurance that such   
insurance will be sufficient to cover potential claims, or that adequate,       
affordable insurance coverage will be available to the Company in the future. A 
partially or completely uninsured successful claim against the Company or a     
successful claim in excess of the liability limits or relating to an injury     
excluded under the policy could have a material adverse effect on the Company.  

OTHER REGULATORY MATTERS                                                        

  The Company's business, and the catalog industry in general, is subject to
regulation by a variety of state and federal laws relating to, among other      
things, advertising and sales taxes. The sale of beer and 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 Company has applied to the Ohio    
Department of Liquor Control for such a license, which application is currently 
pending. 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 believes that it collects sales in states where it is required to do
so. The Company has no claims or regulatory matters in process or pending as of 
the date of this Prospectus. See "Risk Factors--State Sales Tax."               

PATENTS, TRADEMARKS AND TRADE NAMES                                             

    The Company owns two patents: one for the Aerosphere Smoking system; and one
for the Carey Magic Inch Smoking System. The Company also owns the registered   
trademarks of the Duncan Hill smoking pipe, "EA Carey" the registered trade name
for the Carey smoking pipe, and "Magic Inch," the registered trade name of the  
Carey smoking system. All trademarks and patents are currently maintained in    
effect, with the exception of the U.S. patent for the Carey Magic Inch Smoking  
System which has expired. See "Risk Factors."                                   

EMPLOYEES                                                                       

As of March 20, 1998, the Company has one full-time employee who is the 
manager of its retail store, and five additional part-time employees including  
Miller. Neither the Company nor Kid Stuff are represented by a union and no work
stoppages have occured.                                                         

PROPERTIES                                                                      

   The Company's principal offices are located in Canton, Ohio, and are shared
with the Company's parent and Kids Stuff. The facility consists of 5,600 square 
feet and is leased by Duncan Hill through                                       

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September 30, 1998 with options to renew for a period of two years. The         
Company's warehouse and distribution center is currently operated by Kids Stuff.
It is located in North Canton, Ohio and consists of approximately 18,000 square 
feet, which is leased for a one year term expiring September 30, 1998. The      
Company utilizes approximately 5,000 square feet of this building. Currently,   
all leases are in the name of Duncan Hill, and the rent is paid by Kids Stuff.  
The Company currently pays $32,200 per annum to Kids Stuff for the use of the   
aforementioned facilities and for use of certain equipment. See "Certain        
Transactions."                                                                  

LEGAL PROCEEDINGS                                                               

 While the Company may become involved in suits, proceedings, or claims in
the ordinary course of business, the Company is not currently a party to any    
legal proceedings that the Company believes would have a material adverse effect
on the Company's business, financial condition or results of operations.        

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS                                                

 The names and ages of the directors and executive officers of the Company
are set forth below:                                                            

                                                        [Enlarge/Download Table]

NAME                                  AGE                         POSITION                     
------------------------------------  ---     -------------------------------------------------
                                                                                               

William L. Miller...................      61  Chairman of the Board of Directors, Chief        
                                              Executive Officer, Principal Financial Officer   
                                              and Treasurer                                    
John W. Cobb, Jr. ..................      56  Director                                         
Peter Stokkebye VI..................      67  Director                                         

The term of office for each of the Company's directors is one year until
their respective successors are elected and shall qualify. Executive officers   
serve at the pleasure of the Board of Directors.                                

William L. Miller, has been Chairman of the Board of Directors of the   
Company and its President and Chief Executive Officer since December 1997.      
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 it was formed by Duncan    
Hill in 1990 until July 1996. Mr. Miller is President, Founder and a director of
Duncan Hill. Prior to founding Duncan Hill in 1977, Mr. Miller founded the MBI  
Corporation, which designed and developed packaging machinery (1975-78). Mr.    
Miller served in executive capacities in the direct marketing industry from 1971
to 1975. He holds a Bachelors Degree in Mechanical Engineering from Purdue      
University and a Masters Degree in Business Administration from Indiana         
University.                                                                     

  John W. Cobb, Jr., has been a Director of the Company since December 1997.
Mr. Cobb is a Senior Vice President of Marketing at McGraw-Hill Continuing      
Education center in Washington, DC. He has been with McGraw-Hill since 1981.    
Previously, he was the Vice President of Marketing and Syndication Sales for    
C.B.S., Inc., Columbia House Division in New York (1979-1981) 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.                                 

   Peter Stokkebye VI, has been a Director of the Company since December 1997.
From 1962 to 1992, he served as the Managing Director (retired) of Peter        
Stokkebye International a/s, Denmark. He currently holds the position of        
Honorary Chairman. Established in Odense, Denmark, in 1882, Peter Stokkeybe     
International a/s manufactures fine quality smoking tobaccos and sells premium  
cigars. This company developed and supplied the British Prime Minister, Sir     
Winston Churchill, with his preferred cigar brand, Santa Maria. Mr. Stokkebye   
began his career by serving in the Royal Guard of the late King Fredrick the    
Ninth of Denmark, and with employment by various tobacco manufacturers in       
Denmark, Switzerland and the U.S.A. In 1962, Mr. Stokkebye became Managing      
Director of Peter Stokkebye International a/s.                                  

Peter Stokkebye VI is considered by Management to be the only current   
outside (independent) director of the Company. Following the completion of the  
Offering, the Company will attempt to identify and appoint one other individual 
who is not affiliated with the Company or its affiliates as a director. Since   
this person has not yet been identified, there can be no assurance given that   
the Company will be able to attract a suitable candidate to serve as a director.
If successful, this presently unidentified person combined with Peter Stokkebye 
VI, would provide the Company with two independent directors.                   

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  The Underwriter has been granted by the Company the right to designate one
director to serve on the Company's Board of Directors for a period of three     
years from the date of this Prospectus. As of the date hereof, no such person   
has been designated. Upon the appointment of one additional unaffiliated and    
outside director, the Board of Directors intends to 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.                           

EXECUTIVE COMPENSATION                                                          

The following table sets forth the total compensation paid to the named 
Chief Executive Officer for the fiscal years ended December 31, 1997, 1996 and  
1995. During 1997, the Company did not have any other executive officers.       

                                                        [Enlarge/Download Table]

                       ANNUAL COMPENSATION                                                    LONG TERM COMPENSATION       
------------------------------------------------------------------                       --------------------------------  
                                                                                                                           
                                                                                                      AWARDS               
                                                                                         --------------------------------  


           (A)                (B)         (C)            (D)                (E)                  (F)              (G)      

                                                                           OTHER                                NUMBER     
                                                                          ANNUAL             RESTRICTED           OF       
        NAME AND                                                       COMPENSATION        STOCK AWARD(S)      OPTIONS/    
   PRINCIPAL POSITION        YEAR      SALARY($)      BONUS($)              ($)                  ($)           WARRANTS    
-------------------------  ---------  -----------  ---------------  -------------------  -------------------  -----------  
                                                                                                                           
William Miller...........       1997      28,167            -0-                -0-                  -0-(3)       400,000(4)
  Chief Executive               1996      31,000(1)          -0-               -0-                  -0-              -0-   
  Officer(2)                    1995      31,000(1)          -0-               -0-                  -0-              -0-   


                       AN                                                                                                  
-------------------------                                                                                                  
                                                                                                                           
                              PAYOUTS                                                                                      
                           -------------                                                                                   
           (A)                  (H)               (I)                                                                      
                                                  ALL                                                                      
                               LTIP              OTHER                                                                     
        NAME AND              PAYOUTS        COMPENSATION                                                                  
   PRINCIPAL POSITION           ($)               ($)                                                                      
-------------------------  -------------  -------------------                                                              
                                                                                                                           
William Miller...........          -0-               -0-                                                                   
  Chief Executive                  -0-               -0-                                                                   
  Officer(2)                       -0-               -0-                                                                   

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

(1) Compensation was paid by Kids Stuff or Duncan Hill, which provided          
  management and general and administrative services to the Company (and its
 predecessor, Carey), and which after Carey's reincorporation in Delaware,
continued to maintain the named Executive Officer on its payroll.       
   Approximately 20%, 31% and 31% of Miller's compensation paid by Duncan Hill
    or Kids Stuff to Miller were expensed to the Company in 1997, 1996 and 1995,
respectively. The table reflects the amount of Mr. Miller's compensation
allocated to the Company. See "The Company and its Parent."             

(2) Mr. Miller served as the President of Carey Inc. until its reincorporation  
in Delaware after which time he became Chief Executive Officer of the   
    Company. Since December 1, 1997, Mr. Miller is being paid by the Company for
   services rendered to it under his employment contract with the Company. Mr.
 Miller also has an employment contract with Duncan Hill and an employment
 contract with Kids Stuff for services rendered by him to those companies.
   See "Risk Factors--Chief Executive Officer Not Required to Work Full-Time;"
and "Potential Conflict of Interest."                                   

(3) Does not include securities issued to Duncan Hill, a public company         
 controlled by Mr. Miller. See "Certain Transactions" for a description of
these transactions, which transactions include 1,000,000 shares of the  
    Company's Common Stock in connection with the reincorporation of the Company
in Delaware, 5,000,000 shares of Series A Preferred Stock issued as a   
    dividend to Duncan Hill, 1,100,000 shares of Series B Preferred Stock issued
 to Duncan Hill in connection with Duncan Hill's assumption of $300,000 of
 the Company's indebtedness to Kids Stuff and a dividend to Duncan Hill of
Warrants to purchase 138,000 shares of the Company's Common Stock, which
Warrants upon the completion of the Offering automatically convert into 
138,000 Class A Warrants identical to those sold in the Offering.       

(4) Includes warrants to purchase 200,000 shares of the Company's Common Stock, 
which warrants upon the completion of the Offering automatically convert
 into 200,000 Class A warrants identical to those sold in the Offering and
options to purchase 200,000 shares of the Company's Common Stock as     
described herein.                                                       

    Options/Warrants Grants Table--The following table provides information with
respect to individual grants of stock options and warrants by the Company during
fiscal 1997 to the Chief Executive Officer named in the preceding summary       
compensation table.                                                             

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OPTION GRANTS IN LAST FISCAL YEAR 

                                                        [Enlarge/Download Table]

                                                                                                             POTENTIAL        
                                                                                                         REALIZED VALUE AT    
                                                                                                           ASSUMED ANNUAL     
                                                                                                           RATES OF STOCK     
                                                                                                         PRICE APPRECIATION   
                                                                                                         FOR OPTION/WARRANT   
                                         INDIVIDUAL GRANTS                                                    TERM(2)         
----------------------------------------------------------------------------------------------------  ------------------------
                                                                                                                              
                    (A)                           (B)            (C)            (D)          (E)          (F)          (G)    



                                               NUMBER OF     % OF TOTAL                                                       
                                              SECURITIES      OPTIONS/                                                        
                                              UNDERLYING      WARRANTS                                                        
                                               OPTIONS/      GRANTED TO                                                       
                                               WARRANTS       EMPLOYEES      EXERCISE                                         
                                                GRANTED       IN FISCAL        PRICE     EXPIRATION                           
                    NAME                          (#)          YEAR(1)        ($/SH)        DATE        5% ($)       10% ($)  
--------------------------------------------  -----------  ---------------  -----------  -----------  -----------  -----------
                                                                                                                              
William Miller(3)...........................     200,000            100%          6.00     12/01/07      754,600    1,912,400 
William Miller(4)...........................     200,000            100%          5.25           (4)     290,000      634,000 

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

(1) The % of Total Options/Warrants Granted to Employees in Fiscal Year' is     
based upon options/ warrants granted to the Company's employees only and
excludes options/warrants granted to non-employees.                     

(2) The potential realizable value of each grant of options/warrants assumes    
that the market price of the Company'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, after subtracting out the applicable exercise 
price.                                                                  

(3) The exercise price of $6.00 per share may be lowered based upon certain     
    performance criteria. These possible adjustment provisions have been ignored
for purposes of the table above. See "Employment Agreement."            

(4) As of December 1, 1997, the Company granted warrants to purchase 200,000    
  shares of Common Stock to Miller. While these warrants have a term of five
years and are exercisable at $6.00 per share, these warrants, upon the  
completion of the Offering, automatically convert into 200,000 Class A  
Warrants. The expiration date of the Class A Warrants is disclosed in   
    "Description of Securities--Warrants." The information in the table reflects
the conversion of these warrants into Class A Warrants.                 

Aggregated Option/Warrant Exercises and Fiscal Year-End Option/Warrant  
Table--The following table provides information with respect to each exercise of
stock options/warrants during fiscal 1997 by the Chief Executive Officer named  
in the preceding summary compensation table and the fiscal year-end value of    
unexercised options and warrants. Since there is no public market for the       
Company's Common Stock at December 31, 1997, the following table assumes a      
fiscal year end value of $6.00 per share based upon the initial public offering 
price of the Company's Common Stock included in the Units without any value     
attributed to the Class A Warrants included in the Units.                       

AGGREGATED OPTION/WARRANT/EXERCISES IN LAST FISCAL YEAR 
AND FISCAL YEAR-END OPTION/WARRANT VALUES 

                                                        [Enlarge/Download Table]

                  (A)                           (B)               (C)                   (D)                     (E)        

                                                                                                                           
                                                                                                              VALUE OF     
                                                                                     NUMBER OF              UNEXERCISED    
                                                                                     SECURITIES             IN-THE-MONEY   
                                                                                     UNDERLYING           OPTIONS/WARRANTS 
                                              SHARES                                UNEXERCISED                  AT        
                                            ACQUIRED ON          VALUE            OPTIONS/WARRANTS           FY-END ($)    
                                             EXERCISE         REALIZED(1)          AT FY-END (#)            EXERCISABLE/   
                 NAME                           (#)               ($)        EXERCISABLE/UNEXERCISABLE(1)  UNEXERCISABLE(1)
---------------------------------------  -----------------  ---------------  --------------------------  ------------------
William Miller.........................            -0-               -0-           80,000/200,000             0/210,000    

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

(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, assuming the
conversion of outstanding warrants into Class A Warrants.               

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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.                                                                    

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                                

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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 Prospectus, 
the Compensation Committee has yet to be formed, and accordingly, no stock      
incentives have been granted under the Incentive Plan.                          

EMPLOYMENT AGREEMENT                                                            

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. 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,   
provided, however, that such warrants upon the completion of the Offering       
automatically convert into 200,000 Class A Warrants identical to those sold to  
the public ; (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. Options to    
purchase 80,000 shares are vested and are currently exercisable. The remaining  
options become exercisable as to an additional 40,000 shares on each of January 
1, 1999, January 1, 2000 and January 1, 2001. The initial exercise price of the 
options shall be $6.00 per share subject to adjustment as set forth below. The  
exercise price for vested options may be decreased if (a) the Company meets     
certain performance goals, and (b) 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 net      
income of the Company for the prior fiscal year. The Company shall report to    
Miller, promptly upon audited financial statements for the prior fiscal year    
becoming available, for pre-tax net income of the Company for that year. Miller 
shall have thirty (30) 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.                      

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-reelect him as Chief     
Executive Officer; (b) a                                                        

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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.                                              

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.                                                                

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 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.                                                   

DIRECTORS COMPENSATION                                                          

  The Company intends to pay 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. These                                                       

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options are almost identical to the options given to Miller and described under 
"Employment Contract" except for the date of grant and number of options        
granted.                                                                        

POTENTIAL CONFLICTS OF INTEREST                                                 

Miller is a co-founder of the Company's parent, Duncan Hill. See "The   
Company and its Parent." 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 only one disinterested       
director and Duncan Hill and Miller control the election of the directors       
including the disinterested directors.                                          

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth as of the date of this Prospectus certain
information with respect to the beneficial ownership of Common 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. Beneficial ownership as reported in the    
table above has been determined in accordance with Rule 13d-3 of the Exchange   
Act. 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 or investment power, have been deemed          
beneficially owned. The table and notes thereto do not reflect beneficial       
ownership of Class A Warrants and shares of Preferred Stock held by Duncan Hill 
and/or Miller which ownership is described below the table and accompanying     
footnotes thereto.                                                              

                                                        [Enlarge/Download Table]

                                           SHARES OF                    SHARES OF                                   
                                          COMMON STOCK                 COMMON STOCK             PERCENTAGE          
                                          BENEFICIALLY    NUMBER OF    BENEFICIALLY   ------------------------------
                                          OWNED BEFORE     SHARES      OWNED AFTER       BEFORE           AFTER     
NAME AND ADDRESS(1)                         OFFERING       OFFERED       OFFERING      OFFERING(2)     OFFERING(2)  
---------------------------------------  --------------  -----------  --------------  -------------  ---------------
                                                                                                                    
Duncan Hill(3)(6)......................      1,000,000       69,000(4)       931,000        100.0            50.1   
William L. Miller(5)(6)................         80,000          -0-          80,000           7.4             4.1   
John W. Cobb(7)........................          7,500          -0-           7,500             *               *   
Peter Stokkebye VI(7)..................          7,500          -0-           7,500             *               *   
All three officers and directors and                                                                                
  Duncan Hill as a group)..............      1,095,000       69,000       1,026,000         100.0            52.5   
Linda Gallenberger, Trustee,                                                                                        
  ARO Trust #1 1960 Trust(8)...........        400,000          -0-         400,000          28.6            21.5   

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

*   Represents less than 1% of the outstanding shares.                          

(1) All addresses for Duncan Hill, Miller, John Cobb and Peter Stokkebye are c/o
   The Havana Group, Inc. 4450 Belden Village Street, N.W., Suite 406, Canton,
Ohio 44718.                                                             

(2) Calculated based upon 1,000,000 shares of Common Stock outstanding before   
the Offering and 1,860,000 shares outstanding after the Offering without
giving effect to the possible exercise of the Over-Allotment Option. The
   Shares issued after the Offering include the 400,000 shares to be issued to
the Bridge Lender.                                                      

(3) Miller may be deemed to beneficially own all Duncan Hill's shares based upon
    his 64% controlling interest in Duncan Hill's shares of Common Stock. Duncan
 Hill also owns 5,000,000 shares of Series A Preferred Stock and 1,100,000
   shares of Series B Preferred Stock which have the same voting rights as the
Common Stock. This would bring the number of shares of Common Stock     
    beneficially owned for voting purposes by Duncan Hill before the Offering to
7,100,000 representing, 100% of the voting capital stock and after the  
Offering up to 7,031,000, representing 88.3% of the voting capital stock
assuming the Underwriter's Over-Allotment Option is exercised in full.  

(4) Represents minimum number of shares to be offered pursuant to the           
Underwriters' Over-Allotment Option and/or pursuant to the Concurrent   
Offering by Duncan Hill as a Selling Unit Holder.                       

(5) Miller has a ten-year option to purchase 200,000 shares of Common Stock as  
described under "Executive Compensation--Employment Contracts. The table
 includes only 80,000 of the 200,000 shares represented by the options and
beneficially owned by him as of the date of this Prospectus.            

(6) The shares of Common Stock owned by Miller and Duncan Hill are shown        
separately even though Miller controls Duncan Hill. If shown together,  
Duncan Hill and Miller beneficially own 1,080,000 shares (100%) of the  
 outstanding Common Stock before the Offering and 1,011,000 shares (52.1%)
  after the Offering assuming the Over-Allotment Option is exercised in full
by the Underwriters.                                                    

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(7) Includes the vested portion of the options granted to him. Does not include 
options to purchase an additional 22,500 shares.                        

(8) Linda Gallenberger's address is 120 S. Riverside Plaza, Suite 1620, Chicago,
   Illinois 60606. The table reflects 400,000 shares beneficially owned before
the Offering notwithstanding that such shares will not be issued to the 
    Trust until the completion of the Offering. The Trust's beneficial ownership
    does not include 1,400,000 Class A warrants which are not exercisable within
60 days of the date hereof without the Representative's consent. The    
percentage before the Offering is based upon 1,400,000 shares assumed   
  outstanding. Linda Gallenberger is the Trustee of the Trust. The Trust was
created by Alan R. Osowski (the "Grantor") on January 5, 1960, who      
  established the Trust with his own personal funds. The sole beneficiary of
   the trust is Pamela Osowski, the sister of the Grantor. The Trust is one of
   a series of trusts established for other family members by the Grantor. The
    Trust is an irrevocable family Trust. Upon the death of the beneficiary, the
Trust passes to the beneficiary's children, if any, and if none, to the 
 beneficiary's siblings, or the children of such siblings per stirpes. The
    terms of the Trust are that the Trustee has full discretion to distribute or
  not the income and principal of the Trust. The beneficiary has no right to
 demand any distribution of income or principal. The Grantor has no rights
 whatsoever with respect to the Trust. The Trustee has the sole investment
decision to purchase securities for the Trust, including the Company's  
   securities and the Trustee has the sole investment power and voting control
    of the Company's securities owned by the Trust. The 400,000 shares of Common
Stock and 1,400,000 Class A Warrants held by the Bridge Lender have been
registered for resale in the Concurrent Offering. See "Selling Security 
Holders."                                                               

  Duncan Hill owns 5,000,000 shares of Series A Preferred Stock representing
100% of the outstanding Series A Preferred Stock. The Series A Preferred Stock  
has the same voting privileges as the Common Stock. Duncan Hill owns 1,100,000  
shares of Series B Preferred Stock representing 100% of the outstanding Series B
Preferred Stock. The Series B Preferred Stock has the same voting privileges as 
the Common Stock and may in the future become convertible into Common Stock if  
certain criteria are met by the Company. The Series A and Series B Preferred    
Stock have the right to vote as a separate class from the Common Stock in such  
cases where the rights and privileges of the Preferred Stock would be adversely 
effected by a change in the capitalization of the Company.                      

    The following table sets forth the number of Class A Warrants to be owned by
the Company's officers, directors and the Bridge Lender after the Offering and  
the percentages of ownership of outstanding Class A Warrants assuming the       
Over-Allotment Option is exercised in full.                                     

                                                        [Enlarge/Download Table]

                                                                                    PERCENTAGE  
                                                                                     AFTER THE  
NAME                                                                     AMOUNT      OFFERING   
---------------------------------------------------------------------  ----------  -------------
                                                                                                
Duncan Hill(1).......................................................     -0-              -0-  
William Miller(2)....................................................     200,000          6.4  
John Cobb............................................................     -0-              -0-  
Peter Stokkebye VI...................................................     -0-              -0-  
Linda Gallenberger, Trustee ARO Trust #1, 1960 Trust(3)..............   1,400,000         44.9  

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

(1) If the Over-Allotment Option is not exercised, Duncan Hill would own 138,000
Class A Warrants after the Offering representing 4.4% of the outstanding
   Class A Warrants. Duncan Hill's 138,000 Class A Warrants and the underlying
  shares of Common Stock are registered for sale in the Concurrent Offering.
See "Selling Security Holders."                                         

(2) Miller's 200,000 Class A Warrants are registered for sale in the Concurrent 
Offering. See "Selling Security Holders."                               

(3) ARO Trust #1, 1960 Trust's 1,400,000 Class A Warrants are registered for    
sale in the Concurrent Offering. See "Selling Security Holders."        

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CERTAIN TRANSACTIONS

   (i) Over the last five years the Company's operations have been financed by
Duncan Hill (and by Kids Stuff in 1997 and 1998) providing certain              
administrative and other services for the benefit of the Company and charging   
the Company for these services as described below. On December 31, 1996, Carey  
entered into an agreement with United Bank to pledge all of its assets as       
collateral along with the assets of Duncan Hill to guarantee an $800,000        
revolving bank line of credit in the name of Kids Stuff. The bank line of credit
is for an open term, payable on demand with a balance as of April 15, 1998 of   
$732,000. The repayment of this credit facility is guaranteed by both the       
Company and Miller. This transaction occurred at a time when the Company was a  
wholly-owned subsidiary of Duncan Hill and the Company did not intend to        
undertake a public offering of its securities. The Company's guarantee was      
without consideration and is irrevocable without the line-of-credit being paid  
in full. Although United Bank has been requested by Kids Stuff to waive the     
Company's guarantee, no assurance can be given that United Bank will honor such 
request.                                                                        

  Prior to 1997, fulfillment and administrative services of the Company were
performed for the Company by Duncan Hill which also provided similar services to
its subsidiary, Kids Stuff. Fulfillment services included order taking, order   
processing, customer service, warehouse packing and delivery, telephone         
contracts and shipping contracts. Fulfillment services were charged to the      
Company and Kids Stuff based on the actual cost. The amount of these charges was
$295,558 during 1996. Administrative services included wages and salaries of    
officers, accounting, purchasing, executive and creative/marketing personnel. It
also included, all leases, contracts, equipment rentals and purchases, audit,   
legal, data processing, insurance and building rent and maintenance. The        
administrative costs were allocated by Duncan Hill to the Company and Kids Stuff
based upon the percentage of assets for each operating subsidiary to the total  
assets for all operating subsidiaries. The amount charged to the Company during 
1996 was $360,873. The percentages for 1996 were 31% to the Company and 69% to  
Kids Stuff. During 1997, all administrative and fulfillment services were       
performed or paid by Kids Stuff on behalf of the Company. All fulfillment       
services were contracted and paid by Kids Stuff and charged to the Company based
on the actual cost. The charges to the Company were $218,632 for 1997. All      
administrative costs were allocated between the Company and Kids Stuff based    
upon the percentage of assets for each respective operating company to the total
assets for both operating companies with 33% charged to the Company for the     
period January 1, 1997 through June 30, 1997 and 21% charged to the Company for 
the period July 1, 1997 through December 31, 1997. The total charges to the     
Company from Kids Stuff were $255,120. Duncan Hill also incurred certain other  
costs that were allocated to the Company and Kids Stuff based on the same method
and percentages as described above.                                             

   These costs were incurred and billed in the name of Duncan Hill and include
such items as legal fees, outside accounting fees and insurance expense. Though 
Duncan Hill was billed for the items the Company partially benefited from the   
services received. The charge to the Company was $65,474.                       

Effective January 1, 1998, the Company has an 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
is also obligated to pay Kids Stuff an amount equal to 5% of the Company's 1998 
pre-tax profits as additional consideration for Kids Stuff providing the Company
with administrative and fulfillment services. In addition to the above, the     
Company also expects to incur additional administrative costs such as legal,    
accounting, depreciation and amortization and tax expenses which costs will be  
incurred by and paid for directly by the Company.                               

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 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.                                                     

Effective September 1997, the Company obtained its own banking accounts,
whereby the Company manages all deposits and payments. the Company will manage  
its own functions with the exception of those discussed above, for which the    
Company will make payment to Kids Stuff for services provided by Kids Stuff. At 
January 1, 1998, the Company owed a net of $173,752 to Kids Stuff and is owed a 
net amount which consists of charges for fulfilment and administrative services 
of $473,752 less $300,000 of affiliate indebtedness assumed by Duncan Hill      
relating to the sale of the Company's Series B Preferred Stock. See "(iv)"      
below. The Company is also owed a net of $43,860 from Duncan Hill which consists
of balances since 1984 totaling $12,312,833 owned by Duncan Hill for payments   
from the Company in the form of revenue deposits as mentioned above, $8,455,066 
in payments made on behalf of the Company by Duncan Hill for accounts payable   
and other payments and $3,813,907 owed to Duncan Hill for fulfilment and        
administrative expenses allocated to the Company. The Company intends to pay the
balance due to Kids Stuff from cash flow over the next 12 months.               

 (ii) Pursuant to an employment agreement, the Company granted Miller five
year Warrants to purchase 200,000 shares of the Company's Common Stock in       
December 1997. Upon the completion of the Offering, the aforesaid Warrants which
are currently exercisable at $6.00 per share automatically convert into Class A 
Warrants identical to those sold in the Offering. See "Selling Security         
Holders."                                                                       

(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 Offering, the aforesaid warrants which are currently exercisable at $6.00   
per share automatically convert into Class A Warrants identical to those sold in
the Offering. See "Selling Security Holders."                                   

   (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 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. As of the date of this Prospectus,  
all issued and outstanding shares of Series B Preferred Stock are owned by      
Duncan Hill. See "Description of Securities."                                   

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. See "Possible Conflicts of Interest."                  

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DESCRIPTION OF SECURITIES 

UNITS                                                                           

 The securities that are offered hereby are being offered and will be sold
only in units ("Units"). Each Unit consists of one share of Common Stock, $.001 
par value (the "Common Stock") and two Class A Warrants. The Common Stock and   
the Class A Warrants are not detachable or separately transferable until the    
earlier of (i)       , 1998 (six months from the date of this Prospectus) or    
(ii) the date selected by the Representative in writing for separation (the     
"Separation Date"). After the Separation Date, the Common Stock and Class A     
Warrants will be detachable and may trade separately.                           

COMMON STOCK                                                                    

The Company has 25,000,000 shares of authorized Common Stock, $.001 par 
value. Immediately prior to the Offering, 1,000,000 shares of Common Stock were 
issued and outstanding, all of which are owned by Duncan Hill.                  

Holders of Common Stock are entitled to one vote for each share held of 
record on all matters submitted to a vote of stockholders. Stockholders do not  
have cumulative voting rights. Subject to preferences that may be applicable to 
any then outstanding Preferred Stock, holders of Common Stock are entitled to   
receive ratably such dividends as may be declared from time to time by the Board
of Directors out of funds legally available therefor. See "Dividend Policy." In 
the event of a dissolution, liquidation or winding-up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preference of any then outstanding Preferred 
Stock. Holders of Common Stock have no right to convert their Common Stock into 
any other securities. The Common Stock has no preemptive or other subscription  
rights. There are no redemption or sinking fund provisions applicable to the    
Common Stock. All outstanding shares of Common Stock are, and the Common Stock  
to be outstanding upon completion of the Offering will be, duly authorized,     
validly issued, fully paid and nonassessable.                                   

PREFERRED STOCK                                                                 

  The Certificate of Incorporation provides the Company's Board of Directors
with 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, liquidation      
preferences and the number of shares constituting any series or the designation 
of such series. The issuance of Preferred Stock could adversely affect the      
voting power of holders of Common Stock and could have the effect of delaying,  
deferring or preventing a change in control of the Company. The Company has no  
present plans to issue any shares of Preferred Stock beyond the presently       
outstanding Series A Preferred Stock and Series B Preferred Stock discussed     
below.                                                                          

SERIES A PREFERRED STOCK                                                        

The Company has issued and outstanding 5,000,000 shares of Series A     
Preferred Stock, $.001 par value. 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 common stockholders with the Series A Preferred Stock voting as
a class with the Common Stock and Series B Preferred Stock and the right to vote
as a separate class only where required by Delaware law. As of the date of this 
Prospectus, all of the issued and outstanding shares of the Series A Preferred  
Stock are held by Duncan Hill. The Series A Preferred Stock, Series B Preferred 
Stock (described below) and the Common Stock owned by Duncan Hill will enable it
and Miller to maintain control of the Company subsequent to the completion of   
the Offering. See "Risk Factors-- Control by Duncan Hill and Miller." The Series
A Preferred 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                                                                     

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liquidation, dissolution or winding up of the affairs of the Company, each share
of Series A Preferred Stock has a liquidation preference of $.001 per share.    

SERIES B CONVERTIBLE PREFERRED SHARES                                           

The Company has 1,100,000 shares of Series B Preferred Stock, $.001 par 
value. The holders of Series B Preferred Stock are entitled to one vote on all  
matters submitted to a vote of common stockholders with the Series B Preferred  
Stock voting as a class with the Common Stock and Series A Preferred Stock and  
the right to vote as a separate class only where required by Delaware law. 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. As of the date of this Prospectus, all issued   
and outstanding shares of Series B Preferred Stock are owned by Duncan Hill.    
Each share of Series B Preferred Stock is convertible at the option of the      
holder of the Series B Preferred Stock 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. The Series B Preferred Stock is not subject to redemption rights. In the  
event of any voluntary or involuntary liquidation, dissolution or winding up of 
the affairs of the Company, each share of Series B Preferred Stock has a        
liquidation preference of $.001 per share plus all accumulated and unpaid       
dividends.                                                                      

OUTSTANDING WARRANTS                                                            

    The Company currently has outstanding Warrants to purchase 338,000 shares of
its Common Stock at an exercise price of $6.00 per share over a term of five    
years expiring in December 2002. These Warrants which are owned by Duncan       
Hill/Miller upon completion of the Offering automatically convert into 338,000  
Class A Warrants identical to those sold in the Offering. See "Certain          
Transactions."                                                                  

CLASS A WARRANTS                                                                

The Class A Warrants will be issued pursuant to the terms of a Warrant  
Agreement dated as of the date of this Prospectus between the Company and Harris
Trust Company of New York (the "Warrant Agent") named below, a copy of which has
been filed as an exhibit to the Registration Statement of which this Prospectus 
is a part. During the exercise period commencing on the Separation Date and     
expiring       , 2003 (the "Expiration Date"), each Class A Warrant will entitle
the registered holder to purchase one share of Common Stock at an exercise price
of $5.25 per share.                                                             

  The Company may redeem the Class A Warrants at a price of $.01 per Warrant
at any time after they become exercisable and prior to their expiration by      
giving not less than 30 days' written notice mailed to the record holders if the
closing bid price of the Common Stock has been at least $10.50 on each of the 20
consecutive trading days ending on the 15th day prior to the date on which the  
notice of redemption is given.                                                  

The Class A Warrants will expire at 5:00 p.m., New York time, on the    
Expiration Date. In the event a holder of Class A Warrants fails to exercise the
Class A Warrants prior to their expiration, the Class A Warrants will expire and
the holder thereof will have no further rights with respect to the Class A      
Warrants. A holder of Class A Warrants will not have any rights, privileges or  
liabilities as a stockholder of the Company. In the event of the liquidation,   
dissolution or winding up of the Company, holders of the Class A Warrants are   
not entitled to participate in the distribution of the Company's assets.        

    The exercise price of the Class A Warrants and the number of shares issuable
upon exercise of the Class A Warrants will be subject to adjustment to protect  
against dilution in the event of stock dividends, stock splits, combinations,   
subdivisions and reclassifications. No assurance can be given that the market   
price of the Company's Common Stock will exceed the exercise price of the Class 
A Warrants at any time during the exercise period. Class A Warrants may be      
exercised by surrendering to the Warrant Agent the                              

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Class A Warrants and the payment of the exercise price in United States funds by
cash or certified or bank check. No fractional shares of Common Stock will be   
issued in connection with the exercise of Class A Warrants. Upon exercise, the  
Company will pay to the holder the value of any such fractional shares based    
upon the market value of the Common Stock at such time. The Company is required 
to keep available a sufficient number of authorized shares of Common Stock for  
issuance to permit exercise of the Class A Warrants.                            

    Purchasers of the Class A Warrants will have the right to exercise the Class
A Warrants to purchase shares of Common Stock only if a current prospectus      
relating to such shares is then in effect and only if the shares are qualified  
for sale under the securities laws of the jurisdictions in which the various    
holders of the Class A Warrants reside. The Company has undertaken to maintain  
the effectiveness of the Registration Statement of which this Prospectus is a   
part or to file and maintain the effectiveness of another registration statement
so as to permit the purchase of the Common Stock underlying the Class A         
Warrants, but there can be no assurance that the Company will be able to do so. 
The Class A Warrants may be deprived of any value if this Prospectus or another 
prospectus covering the shares issuable upon the exercise thereof is not kept   
effective or if such Common Stock is not qualified or exempt from qualification 
in the jurisdictions in which the holders of the Class A Warrants reside.       

The Company may find it more difficult to raise capital if it should be 
needed for the business of the Company while the Class A Warrants are           
outstanding. At any time when the holders of Class A Warrants might be expected 
to exercise them, the Company would, in all likelihood, be able to obtain       
additional capital on terms more favorable than those provided in the Class A   
Warrants. See "Risk Factors--Current Prospectus and State Blue Sky Registration 
Required to Exercise Class A Warrants."                                         

  See "Underwriting" regarding an agreement to pay a solicitation fee to the
Representative if certain conditions are met.                                   

UNDERWRITERS' UNIT PURCHASE OPTION                                              

In connection with the Offering, the Company has agreed to sell to the  
Underwriters, for an aggregate purchase price of $46, the Underwriters' Unit    
Purchase Option which entitles the holders to purchase 46,000 Units. For a      
description of the terms of the Underwriters' Unit Purchase Option, see         
"Underwriting."                                                                 

TRANSFER AGENT AND REGISTRAR                                                    

  The transfer agent and registrar for the Company's Units, Common Stock and
Class A Warrants is Harris Trust Company of New York, 430 Park Avenue, New York,
NY 10022.                                                                       

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UNREGISTERED SHARES ELIGIBLE FOR IMMEDIATE AND FUTURE SALE

    Upon completion of the Offering, the Company will have outstanding 1,860,000
shares of Common Stock. Of such shares, 460,000 shares of Common Stock will be  
freely transferable without restriction or further registration under the       
Securities Act (the "Unrestricted Shares"), other than any of such shares       
acquired by persons who are currently "affiliates" of the Company as defined by 
Rule 144 under the Act, which will be subject to limitations under Rule 144 for 
so long as such persons are affiliates. An additional 400,000 shares have been  
registered for resale in the Concurrent Offering and are freely transferable    
subject to the holder being able to deliver a current Prospectus. See "Selling  
Security Holders."                                                              

Duncan Hill beneficially owns 1,000,000 shares of the Company's Common  
Stock, 5,000,000 shares of the Company's Series A Preferred Stock, and 1,100,000
shares of the Company's Series B Convertible Preferred Stock. Of the 1,000,000  
shares of Common Stock, 69,000 shares have been registered for sale pursuant to 
the Over-Allotment option and to the extent not exercised, if any, pursuant to  
the Concurrent Offering. The remaining 931,000 shares of Common Stock and the   
aforementioned Preferred Stock held by Duncan Hill (and options to purchase     
260,000 shares held by the three directors of the Company) are "restricted      
securities" within the meaning of Rule 144, and may not be sold in the absence  
of registration other than in accordance with Rule 144 described below or       
pursuant to another exemption from registration under the Securities Act. These 
restricted shares are also subject to a 24-month "lock-up" agreement with the   
Representative. See "Underwriting."                                             

In general, under Rule 144 as currently in effect, a person (or persons 
whose shares are aggregated), including persons who may be deemed to be         
"affiliates" of the Company as that term is defined under the Securities Act, is
entitled to sell within any three-month period a number of shares beneficially  
owned for at least one year that does not exceed the greater of (i) one percent 
of the then-outstanding shares of Common Stock or (ii) the average weekly       
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain requirements as to the   
manner of sale, notice and the availability of current public information about 
the Company. However, a person who is not an affiliate and has beneficially     
owned such shares for at least two years is entitled to sell such shares without
regard to the volume, manner of sale or notice requirements.                    

 No predictions can be made as to the effect, if any, that future sales of
shares under Rule 144 or the availability of shares for sale will have on the   
then-prevailing market, if any. Sales of substantial amounts of Common Stock    
pursuant to Rule 144 or otherwise may adversely affect the then-prevailing      
market price of the Units, Common Stock and the Class A Warrants, should a      
public trading market for such securities develop.                              

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UNDERWRITING

  The Underwriters, as set forth below and for whom VTR Capital, Inc. is the
Representative, have agreed, subject to the terms and conditions of the         
Underwriting Agreement, to purchase from the Company a total of 460,000 Units on
a "firm commitment" basis. The Underwriting Agreement provides that the         
obligations of the Underwriters to purchase the Units are subject to certain    
conditions and that the Underwriters are obligated to purchase all of the       
460,000 Units, if any are purchased.                                            

                                                        [Enlarge/Download Table]

UNDERWRITERS                                                                   NUMBER OF UNITS
-----------------------------------------------------------------------------  ---------------
                                                                                              
VTR Capital, Inc.............................................................                 
                                                                                    -------   
    Total....................................................................       460,000   
                                                                                    -------   
                                                                                    -------   

The Underwriters have advised the Company that they propose to offer the
Units to the public at the offering price set forth on the cover page of this   
Prospectus and that they may allow to certain dealers concessions not in excess 
of $.60 per Unit. After the initial public offering, the offering price and     
discount may be changed. The Underwriters do not intend to sell any of the Units
offered hereby to accounts for which they have discretionary authority.         

 Duncan Hill has granted to the Underwriters an option, exercisable during
the 30-day period from the date of this Prospectus, to purchase from Duncan Hill
at the offering price, less the underwriting discount, up to a maximum of 69,000
additional Units for the sole purpose of covering over-allotments, if any.      

The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing            
transactions permit bids to purchase the underlying security so long as the     
stabilizing bids do not exceed a specific maximum. Syndicate covering           
transactions involve purchases of the Company's securities in the open market   
after the distribution has been completed in order to cover syndicate short     
positions. Penalty bids permit the Underwriters to reclaim a selling concession 
from a syndicate member when the securities originally sold by such syndicate   
member are purchased in a syndicate covering transaction to cover syndicate     
short positions. Such stabilizing transactions, syndicate covering transactions 
and penalty bids may cause the price of the securities to be higher than they   
would otherwise be in the absence of such transactions. These transactions may  
be effected on the OTC Electronic Bulletin Board assuming the Company is        
successful in listing its securities on such system. See "Risk Factors--Certain 
Implications of Trading Over-the-Counter; Penny Stock Regulations."             

  The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with 
the Registration Statement, including liabilities under the Securities Act.     
Insofar as indemnification for liabilities arising under the Securities Act may 
be provided to officers, directors or persons controlling the Company, the      
Company has been informed that in the opinion of the Securities and Exchange    
Commission, such indemnification is against public policy and is therefore      
unenforceable.                                                                  

   The Underwriters have informed the Company that they do not expect sales of
shares of Common Stock to be made to discretionary accounts to exceed 2% of the 
shares of Common Stock offered hereby.                                          

The Company has agreed to pay the Underwriters an expense allowance on a
non-accountable basis equal to 3% of the gross proceeds from the sale of the    
Units offered hereby (including the sale of any Units pursuant to the           
Underwriters' Over-Allotment Option). The Company also has agreed to pay all    
expenses in connection with qualifying the Units offered hereby for sale under  
the laws of such states as the Representative may designate, and the fees, costs
and disbursements in connection with registering the Offering with the NASD,    
including fees and expenses of counsel retained for such purposes by the        
Representative.                                                                 

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 The Company has also agreed to sell to the Underwriters, for an aggregate
purchase price of $46, the Underwriters' Unit Purchase Option, which entitles   
the holder(s) to purchase up to 46,000 Units at an exercise price of $9.00 per  
Unit. The Units are identical to the Units sold to the public except that the   
exercise price of Class A Warrants included in the Units is 150% of the then    
effective exercise price of the publicly held Class A Warrants. The             
Underwriters' Unit Purchase Option is exercisable for four years commencing one 
year from the date of the Prospectus. The Underwriters' Unit Purchase Option may
not be assigned, transferred, sold or hypothecated by the Underwriters until 12 
months after the date of this Prospectus, except to officers or partners of the 
Underwriters, selling group members and their officers and partners. Any profits
realized by the holders upon the sale of the Units issuable upon exercise of the
Underwriters' Unit Purchase Option may be deemed to be additional underwriting  
compensation. The exercise price and the number of Units underlying the         
Underwriters' Unit Purchase Option are subject to adjustment in certain events  
to prevent dilution. For the life of the Underwriters' Unit Purchase Option, the
holders thereof are given, at a nominal cost, the opportunity to profit from a  
rise in the market price of the Units with a resulting dilution in the interest 
of other stockholders. The Company may find it more difficult to raise capital  
for its business if the need should arise while the Underwriters' Unit Purchase 
Option is outstanding. At any time when the holders of the Underwriters' Unit   
Purchase Option might be expected to exercise it, the Company would probably be 
able to obtain additional capital on more favorable terms.                      

The Company has agreed to register, at its expense, under the Securities
Act, on one occasion, the Underwriters' Unit Purchase Option or the underlying  
securities covered by the Underwriters' Unit Purchase Option at the request of  
the holders of 50% of the Underwriters' Unit Purchase Option. Such request may  
be made at any time during a period of four years beginning one year from the   
date of this Prospectus. The Company has also agreed to certain "piggyback"     
registration rights for the holders of the Underwriters' Unit Purchase Option or
securities issuable upon the exercise of the Underwriters' Unit Purchase Option.
Any exercise of such registration rights by the Underwriter or the sale of any  
Units by the holders thereof may be dilutive to the then present shareholders   
and may also have an adverse effect upon either the Company's ability to obtain 
additional capital, or the market price of the Company's securities should a    
public trading market develop.                                                  

Commencing 12 months after the date of this Prospectus to the extent not
inconsistent with the guidelines of the NASD and the rules and regulations of   
the Commission, the Company has agreed to pay the Representative a warrant      
solicitation fee of 5% of the exercise price for each Warrant exercised         
(excluding Class A Warrants exercised by the Representative) payable upon the   
exercise of such Class A Warrant. However, no compensation will be paid to the  
Representative in connection with the exercise of such Class A Warrants if (a)  
the market price of the underlying shares of Common Stock is lower than the     
exercise price, (b) the Class A Warrants are held in a discretionary account,   
(c) the Class A Warrants are exercised in an unsolicited transaction or (d) the 
disclosure of such compensation arrangements has not been made in the documents 
provided to the customers both as part of the original offering and at the time 
of exercise. In addition, unless granted an exemption by the Commission from    
Regulation M under the Exchange Act, the Representative will be prohibited from 
engaging in any market making activities or solicited brokerage activities with 
regard to the Company's securities until the later of the termination of such   
solicitation activity or the termination by waiver or otherwise of any right the
Representative may have to receive a fee for the exercise of the Class A        
Warrants following such solicitations.                                          

The Company has agreed not to issue, sell, offer to sell or otherwise   
dispose of any shares of the Company's Common Stock, or securities convertible  
into Common Stock, for a period of twenty-four (24) months from the date of this
Prospectus, without the prior written consent of the Representative other than  
issuances of Common Stock by the Company in connection with the exercise of     
outstanding options and warrants and up to 50,000 restricted shares to employees
and in connection with mergers and acquisitions, so long as such newly issued   
shares (other than in connection with the exercise of outstanding               

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publicly held warrants) can not be resold prior to the date which is twenty-four
(24) months from the date of this Prospectus.                                   

   Duncan Hill and each officer and director of the Company have agreed not to
sell or otherwise transfer any securities of the Company beneficially owned by  
them on the date of this Prospectus for a period of 24 months from the date of  
this Prospectus, without the prior written consent of the Representative.       
However, the foregoing is not applicable to the 69,000 Units that may be sold by
Duncan Hill pursuant to the Over-Allotment Option or the Concurrent Offering and
200,000 Class A Warrants to be offered by Miller pursuant to the Concurrent     
Offering.                                                                       

 The Company has agreed to enter into a two-year consulting agreement (the
"Consulting Agreement") with the Representative. Such agreement provides that   
the Representative will render consulting services on investment banking and    
other financial matters to be determined by the Company. Such services will be  
provided upon dates requested by the Company and reasonably acceptable to the   
Representative not to exceed two business days per month. The services to be    
provided by the Representative shall include: assistance in formulating plans   
and presenting financial reports; analyzing third party proposals for the       
provision of additional financing to the Company; assistance in dealing with    
brokers and institutions; assistance in obtaining financial management,         
technical and advisory services; and, assistance in obtaining financial and     
corporate public relations. The aggregate fee due to the Representative for such
consulting services will be $100,000 and shall be paid in full upon the closing 
date of the Offering.                                                           

  The Representative has been granted by the Company the option to designate
one individual to serve on the Company's Board of Directors for a period of     
three years from the date of this Prospectus. That individual must be reasonably
satisfactory to the Company's Board of Directors. As of the date hereof, no such
person has been designated. The Company has been advised by the Representative  
that any individual appointed by the Representative will not likely be an       
officer, director or affiliate of the Representative or any member of the NASD. 
In lieu of nominating a director, the Representative may designate a non-       
director observer to attend meetings of the Company's Board of Directors for a  
period of three years from the date of the Prospectus. Such appointee or        
designee shall receive the same compensation as any other non-executive.        

    If the Company shall within five (5) years from the date of this Prospectus,
enter into any agreement or understanding with any person or entity introduced  
by the Representative involving: (i) the sale of all or substantially all of the
assets and properties of the Company; (ii) the merger or consolidation of the   
Company (other than a merger or consolidation effected for the purpose of       
changing the Company's domicile); or (iii) the acquisition by the Company of the
assets or stock of another business entity, which agreement or understanding is 
thereafter consummated, whether or not during such five (5) year period, the    
Company, upon such consummation, shall pay to the Representative an amount equal
to the following percentages of the consideration paid by the Company in        
connection with such transaction: 5% of the first $4,000,000 or portion thereof,
of such consideration; 4% of the next $1,000,000 or portion thereof, of such    
consideration; 3% of the next $1,000,000 or portion thereof, of such            
consideration; and 2% of such consideration in excess of the first $6,000,000 of
such consideration. The fee payable to the Representative will be in the same   
form of consideration as that paid by or to the company, as the case may be, in 
any such transactions.                                                          

Prior to the Offering, there has been no public market for any of the   
Company's securities. Accordingly, the offering price of the Units offered      
hereby and the terms of the Class A Warrants, including the exercise price of   
the Class A Warrants, were determined by negotiations between the Company and   
the Representative and do not necessarily bear any relationship to the Company's
assets, results of operations or other generally accepted criteria of value.    
Factors considered in determining such prices and terms, in addition to         
prevailing market conditions, include the history of and the prospects of the   
industry in which the Company competes, an assessment of the Company's          
management, the results of                                                      

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operations of the Company in recent periods, the prospects of the Company, its  
capital structure and such other factors as were deemed relevant.               

    The offering price set forth on the cover page of this Prospectus should not
be considered an indication of the actual value of the Units. Such price is     
subject to change as a result of market conditions and other factors and no     
assurance can be given that the Units can be resold at the offering price.      

The foregoing is a summary of all of the material provisions of the     
Underwriting Agreement, Consulting Agreement and Underwriters' Unit Purchase    
Option which have been filed as exhibits to the Registration Statement of which 
this Prospectus forms a part.                                                   

SEC INVESTIGATION INVOLVING THE REPRESENTATIVE.  The Company has been   
advised by the Representative that the Securities and Exchange Commission       
("SEC") has issued a formal order directing a private investigation by the staff
of the SEC. Such order empowers the SEC staff to investigate whether, from June 
1995 to the present, the Representative and certain other persons and/or        
entities may have engaged in fraudulent acts or practices in connection with the
purchase or sale of securities of certain other companies in violation of       
Sections 10(b) and 15(c)(1) of the Securities Exchange Act of 1934, as amended  
(the "Exchange Act") and Section 17(a) of the Securities Act. These acts or     
practices include whether the Representative and certain other brokers or       
dealers effected transactions or induced transactions by making untrue          
statements of material fact and whether the Representative and certain others   
have engaged in manipulative, deceptive or other fraudulent devices. The formal 
order also concerns whether the Representative and certain others who have      
agreed to participate in a distribution have violated Rule 10b-6 of the Exchange
Act by having bid for or purchased securities for accounts in which it had a    
beneficial interest or which is the subject of such distribution. As of April   
10, 1998, the Representative understands that the SEC investigation is ongoing. 
The Representative cannot predict whether this investigation will result in any 
type of enforcement action againnst the Representative. See "Risk Factors."     

    NASD COMPLAINT AGAINST THE REPRESENTATIVE  The Company also has been advised
by the Representative that during 1996 and 1997, the staff of the NASD conducted
an inquiry into the trading and sales practices of securities of another company
(the "issuer") in and around April 1995. In connection with the inquiry, the    
NASD staff obtained documents from the Representative and conducted             
on-the-record interviews of, among others, the Representative's President-Chief 
Executive Officer, Head Trader and Chief Financial Officer. On February 20, 1998
the NASD Department of Enforcement filed an administrative complaint against the
Representative, a principal of the firm and two traders from other broker-      
dealers. The complaint alleges that the Representative, acting through its then 
President-Chief Executive Officer-Sole Owner, acquired and distributed certain  
securities of the issuer as "statutory underwriters" without registration under 
Section 5 of the Securities Act representing approximately 28% of the available 
float in the security in purported violation of NASD Rule 2110 and failed to    
provide customers with an offering prospectus. The complaint further alleges    
that at the same time the Representative and its then President-Chief Executive 
Officer-Sole Owner (the "Respondents") (i) entered into a consulting agreement  
with the issuer to arrange for the sale of certain of its securities at a       
"designated price" slightly below the market at the time; (ii) sold short to    
retail customers the issuer's securities at prices substantially above the      
designated price; (iii) acquired from five short term investors securities of   
the issuer to cover the Representative's large short inventory position in what 
had previously been an inactive or thinly traded market for the issuer's        
securities; (iv) illegally bidded for, purchased, or induced others to purchase 
the issuer's securities in the secondary market while a distribution was still  
in progress; and (v) continued to make a market in the corporation's stock all  
in purported violation of Section 10(b) of the Exchange Act and Rule 10b-6      
thereunder and NASD Rules 2110 and 2120. Moreover, the complaint alleges that   
the Respondents caused the aforementioned alleged unregistered distribution     
without filing the necessary documents with the NASD's Corporate Financing      
Department and failed to disclose to customers alleged unfair excessive and     
unreasonable compensation received from the distribution in violation of NASD   
Rules 2110 and 2710. In addition, the complaint alleged that the Respondents    
fraudulently manipulated the market for the issuer's common stock by arbitrarily
increasing the share price and by artificially                                  

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inflating the reported trade volume through "wash" and "matched" or circular    
trading so as to create the appearance of an active market in the stock in      
purported violation of Section 10(b) of the Exchange Act and Rule 10b-5         
thereunder and the NASD Rules 2110 and 2120. According to the complaint, the    
alleged manipulation resulted in an illicit profit to the Representative of     
approximately $402,509. The Complaint contains the following prayer for relief: 
(1) findings of fact and conclusions of law that Respondents committed the      
violations charged and alleged; (2) an order imposing sanctions upon the        
Respondents in accordance with NASD Rule 8310; (3) an order requiring           
Respondents to disgorge fully any and all ill-gotten gains and/or make full and 
complete restitution, together with interest; (4) an order imposing such costs  
of any proceeding as are deemed fair and appropriate under the circumstances    
with accordance with NASD Rule 8330; and (5) an order imposing any other fitting
sanction. The Respondents have indicated that they intend vigorously to contest 
the allegations. A hearing has not yet been scheduled and there have been no    
findings of fact or violations of law in this case. See "Risk Factors."         

SELLING SECURITY HOLDERS

The Registration Statement of which this Prospectus forms a part also   
includes an Alternate Prospectus that covers a "Concurrent Offering" by certain 
Selling Security Holders (as defined below). The Concurrent Offering includes an
offering of 400,000 shares of Common Stock and 1,400,000 Class A Warrants owned 
by the Bridge Lender and the exercise of the Common Stock underlying the        
1,400,000 Class A Warrants by the transferees of the Bridge Lender. The         
Alternate Prospectus also covers the resale of 200,000 Class A Warrants owned by
Miller and the exercise of such 200,000 Class A Warrants by the transferees of  
Mr. Miller. In addition to the foregoing, the Alternate Prospectus includes the 
resale of up to 69,000 Units (identical to those sold in the Offering) to be    
offered by Duncan Hill and the exercise of the Common Stock underlying the      
138,000 Class A Warrants by the transferees of Duncan Hill. See "Principal and  
Selling Stockholder." To the extent that the Underwriters exercise the          
Over-Allotment Option as described herein, then the number of Units to be       
offered by Duncan Hill in the Concurrent Offering will be proportionately       
reduced. (The Bridge Lender, Miller, and Duncan Hill are hereinafter            
collectively referred to as the "Selling Security Holders.") The securities     
offered as part of the Concurrent Offering may be sold at any time after the    
date of this Prospectus. The Class A Warrants held by the Selling Security      
Holders are identical to the Class A Warrants being offered by the Company.     
Sales of such securities or even the potential of such sales at any time may    
have an adverse effect on the market prices of the securities offered hereby.   
See "Certain Transactions" and "Risk Factors--Potential Adverse Effect of       
Redemption or Exercise of Class A Warrants."                                    

  Except for Miller's Common Stock ownership, which is not being offered for
sale, the following tables set forth the beneficial ownership of the Common     
Stock and Class A Warrants of the Company held by each Selling Security Holders 
prior to the Offering and after the Offering, assuming all of the Common Stock  
and Class A Warrants owned and to be offered for sale by the Selling Security   
Holders are sold. The number of shares of Common Stock owned by the Selling     
Security Holders do not include beneficial ownership of options and Class A     
Warrants.                                                                       

TABLE I (COMMON STOCK)

                                                        [Enlarge/Download Table]

                                                                                  PERCENT OF       
                                                                             COMMON STOCK OWNED%   
                                                     COMMON STOCK OWNED                            
                                                    ---------------------  ------------------------
                                                                                                   
                                                     PRIOR TO     AFTER     PRIOR TO       AFTER   
NAME OF BENEFICIAL OWNER                            OFFERING(1) OFFERING    OFFERING     OFFERING  
--------------------------------------------------  ----------  ---------  -----------  -----------
ARO #1 1960 Trust                                                                                  
  Linda Gallenberger, Trustee(1)(2)...............     400,000        -0-        28.5            0 
Duncan Hill.......................................   1,000,000    931,000       100.0         50.1 

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TABLE II (CLASS A WARRANTS) 

                                                        [Enlarge/Download Table]

                                                         CLASS A WARRANTS           PERCENT OF CLASS A    
                                                               OWNED                 WARRANTS OWNED%      
                                                     -------------------------  --------------------------
                                                                                                          
                                                      PRIOR TO       AFTER       PRIOR TO        AFTER    
NAME OF BENEFICIAL OWNER                             OFFERING(1)   OFFERING      OFFERING      OFFERING   
---------------------------------------------------  ----------  -------------  -----------  -------------
ARO #1 1960 Trust                                                                                         
  Linda Gallenberger, Trustee(1)(2)................   1,400,000          -0-          80.6           -0-  
Duncan Hill........................................     138,000          -0-           7.9           -0-  
William L. Miller..................................     200,000          -0-          11.5           -0-  

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

(1) Assumes Common Stock and Class A Warrants are outstanding prior to the      
Offering notwithstanding that such securities are not issuable upon     
conversion of a Convertible Note until the Closing Date of the Offering.

(2) The sole beneficiary of the trust is Pamela Osowski. For additional         
  information on the trust, see footnote 8 to the table under "Principal and
Selling Stockholder."                                                   

Miller is the Company's Chief Executive Officer and Duncan Hill is the  
Company's sole stockholder prior to the Offering. See "Certain Transactions" and
"Principal and Selling Stockholders." The Bridge Lender is not affiliated with  
the Company in any capacity, has had no business relationship with the Company  
at any time and has not owned any of the Company's Securities beneficially or of
record prior to the Offering other than the Convertible Note and Non-Convertible
Note issued to the Bridge Lender on January 23, 1998. See "Use of               
Proceeds--Bridge Lenders."                                                      

   The securities offered hereby may be sold from time to time directly by the
Selling Security Holders. Alternatively, the Selling Security Holders may from  
time to time offer such securities through underwriters, dealers or agents. The 
distribution of securities by the Selling Security Holders may be effected in   
one or more transactions that may take place on the over-the-counter market,    
including ordinary broker's transactions, privately-negotiated transactions or  
through sales to one or more broker-dealers for resale of such securities as    
principals, at market prices prevailing at the time of sale, at prices related  
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Security Holders in connection with such sales of securities. The Selling       
Security Holders and intermediaries through whom such securities are sold may be
deemed "underwriters" within the meaning of the Securities Act with respect to  
the Securities offered, and any profits realized or commissions received may be 
deemed underwriting compensation.                                               

As of the date of this Prospectus, the Selling Security Holders and the 
Underwriters (including the Representative) have advised the Company that they  
do not have any current or future plans, proposals, agreements, arrangements or 
understandings known to the Selling Security Holders or the Underwriters        
(including the Representative) with respect to engaging in transactions with or 
by Selling Security Holders. The Company has filed an undertaking with the      
Commission to file a Post-Effective Amendment to its Registration Statement of  
which this Prospectus and the Alternate Prospectus is a part upon the           
development of any plan, proposals, agreements, arrangements or understandings  
of or known to the Underwriters, including the Representative, with respect to  
transactions with or by the Selling Security Holders.                           

   At the time a particular offer of the shares of Common Stock and/or Class A
Warrants is made by or on behalf of the Selling Security Holders, to the extent 
required, a prospectus will be distributed which will set forth the number of   
the shares of Common Stock and/or Class A Warrants being offered and the terms  
of the offering, including the name or names of any underwriters, dealers or    
agents, if any, the purchase price paid by any underwriter for the shares of    
Common Stock and/or Class A Warrants purchased from the Selling Security Holders
and any discounts, commissions or concessions allowed or reallowed or paid to   
dealers, and the proposed selling price to the public.                          

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    Under the Exchange Act, and the regulations thereto, any person engaged in a
distribution of the shares of Common Stock and/or Class A Warrants of the       
Company offered by the Selling Security Holders may not simultaneously engage in
market-making activities with respect to such securities of the Company during  
the applicable "cooling off" period (up to 5 days) prior to the commencement of 
such distribution. In addition, and without limiting the foregoing, the Selling 
Security Holders will be subject to applicable provisions of the Exchange Act   
and the rules and regulations thereunder, including without limitation,         
Regulation M, in connection with transactions in such securities, which         
provisions may limit the timing of purchase and sales of the Securities by the  
Selling Securities Holders.                                                     

LEGAL MATTERS 

   The validity of the Securities being offered hereby will be passed upon for
the Company by Lester Morse P.C., Suite 420, 111 Great Neck Road, Great Neck, NY
11021. Certain legal matters will be passed upon for the Underwriters by Mintz &
Gold, LLP, 444 Park Avenue South, New York, NY 10016. Lester Morse P.C. has in  
the past represented the Representative in connection with matters unrelated to 
the Offering.                                                                   

EXPERTS 

  The financial statements of The Havana Group, Inc. as of December 31, 1997
and for the years ended December 31, 1997 and 1996 appearing in this Prospectus,
have been audited by Hausser + Taylor LLP, independent auditors, and are        
included herein in reliance upon the authority of said firm as experts in       
auditing and accounting.                                                        

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

CONTENTS

                                                        [Enlarge/Download Table]

                                                                                                          PAGE   
                                                                                                       ----------
                                                                                                                 
INDEPENDENT AUDITORS' REPORT..........................................................................        F-2

FINANCIAL STATEMENTS                                                                                             
  Consolidated balance sheet..........................................................................        F-3
  Consolidated statements of operations...............................................................        F-4
  Consolidated statements of stockholder's equity.....................................................        F-5
  Consolidated statements of cash flows...............................................................        F-6
  Notes to consolidated financial statements..........................................................   F-7-F-13

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INDEPENDENT AUDITORS' REPORT

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

 We have audited the accompanying consolidated balance sheet of The Havana
Group, Inc. and Subsidiary as of December 31, 1997, and the related consolidated
statements of operations, stockholder's equity, and cash flows for the years    
ended December 31, 1997 and 1996. 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 generally accepted auditing  
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Havana     
Group, Inc. and Subsidiary as of December 31, 1997, and the consolidated results
of their operations and their cash flows for the years ended December 31, 1997  
and 1996, in conformity with generally accepted accounting principles.          

   As discussed in Note B to the consolidated financial statements, The Havana
Group, Inc. was formed in December 1997 and prior to then had no operations. The
results of operations and cash flows prior to December 1997 included in the     
accompanying consolidated financial statements are those of the predecessor     
companies, E. A. Carey of Ohio, Inc. and Monarch Pipe Company.                  

                        Hausser + Taylor LLP

CANTON, OHIO                                                                    
February 10, 1998                                                               

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1997 

                                                        [Enlarge/Download Table]
                                                                                           
                                          ASSETS                                           
CURRENT ASSETS                                                                             
  Cash.......................................................................... $  79,611 
  Accounts receivable, net of allowance for doubtful accounts of $5,500.........    37,574 
  Inventories...................................................................   477,907 
  Deferred catalog expense......................................................    54,183 
  Prepaid expenses..............................................................     3,587 
                                                                                 --------- 
      Total current assets......................................................   652,862 

DEFERRED FEDERAL INCOME TAX.....................................................    29,070 

PROPERTY AND EQUIPMENT                                                                     
  Leasehold improvements........................................................    83,945 
  Furniture and fixtures........................................................    10,946 
  Machinery and equipment.......................................................    83,575 
                                                                                 --------- 
                                                                                   178,466 

  Less accumulated depreciation.................................................    84,649 
                                                                                 --------- 
                                                                                    93,817 
OTHER ASSETS, net of accumulated amortization                                              
  Customer lists................................................................   464,479 
                                                                                 --------- 
                                                                                 $1,240,228
                                                                                 --------- 
                                                                                 --------- 
                           LIABILITIES AND STOCKHOLDER'S EQUITY                            
CURRENT LIABILITIES                                                                        
  Accounts payable.............................................................. $ 177,893 
  Due to affiliates.............................................................   130,392 
  Customer advances.............................................................     7,836 
  Accrued expenses..............................................................       994 
      Total current liabilities.................................................   317,115 
                                                                                 --------- 

STOCKHOLDER'S EQUITY                                                                       
  Preferred stock--$.001 par value, 10,000,000 shares authorized:                          
    Class A--5,000,000 shares issued and outstanding............................     5,000 
    Class B--1,100,000 shares issued and outstanding............................     1,100 
  Common stock--$.001 par value, 25,000,000 shares authorized, 1,000,000 shares            
    issued and outstanding......................................................     1,000 
  Additional paid-in capital.................................................... 1,092,900 
  Retained earnings (deficit)...................................................  (176,887)
                                                                                 --------- 
      Total stockholder's equity................................................   923,113 
                                                                                 --------- 
                                                                                 $1,240,228
                                                                                 --------- 
                                                                                 --------- 

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

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF OPERATIONS 

YEARS ENDED DECEMBER 31, 1997 AND 1996

                                                        [Enlarge/Download Table]

                                                                                           1997          1996     
                                                                                       ------------  ------------ 
                                                                                                                  
Net Sales............................................................................. $  1,427,574  $  1,656,316 
Cost of Sales.........................................................................      773,695       946,660 
                                                                                       ------------  ------------ 
Gross Profit..........................................................................      653,879       709,656 
Selling Expenses......................................................................      316,699       374,303 
General and Administrative Expenses...................................................      398,952       450,876 
                                                                                       ------------  ------------ 
Net Loss.............................................................................. $    (61,772) $   (115,523)
                                                                                       ------------  ------------ 
                                                                                       ------------  ------------ 
Basic and Diluted Loss per Share...................................................... $       (.06) $       (.12)
                                                                                       ------------  ------------ 
                                                                                       ------------  ------------ 

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

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY 

YEARS ENDED DECEMBER 31, 1997 AND 1996

                                                        [Enlarge/Download Table]

                                                       COMMON      PREFERRED     PAID-IN      RETAINED               
                                                        STOCK        STOCK       CAPITAL      EARNINGS      TOTAL    
                                                     -----------  -----------  ------------  -----------  ---------- 
                                                                                                                     

Balance--January 1, 1996............................  $     500    $  --       $    --       $   800,408  $  800,908 

Net loss............................................     --           --            --          (115,523)   (115,523)

Balance--December 31, 1996..........................        500       --            --           684,885     685,385 

Return of additional Capital Contribution to Duncan                                                                  
  Hill..............................................       (500)      --            --           --             (500)

Issuance of 1,000,000 shares of Common Stock to                                                                      
  parent company....................................      1,000       --             (1,000)     --           --     

Issuance of 5,000,000 shares of Class A Preferred                                                                    
  Stock to parent company...........................     --            5,000         (5,000)     --           --     

Issuance of 1,100,000 shares of Class B Preferred                                                                    
  Stock to parent company...........................     --            1,100      1,098,900     (800,000)    300,000 

Net loss............................................     --           --            --           (61,772)    (61,772)

Balance--December 31, 1997..........................  $   1,000    $   6,100   $  1,092,900  $  (176,887) $  923,113 

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

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

YEARS ENDED DECEMBER 31, 1997 AND 1996

                                                        [Enlarge/Download Table]

                                                                                             1997         1996     
                                                                                          -----------  ----------- 
                                                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES                                                                               
  Net loss..............................................................................  $   (61,772) $  (115,523)
  Adjustments to reconcile net loss to net cash (used) provided by operating activities:                           
      Depreciation and amortization.....................................................       39,780       38,706 
      (Increase) decrease in accounts receivables--trade................................       (3,294)      44,829 
      (Increase) decrease in inventories................................................     (206,569)      35,070 
      (Increase) in deferred catalog expense............................................      (12,215)      (4,084)
      (Increase) in prepaid expenses....................................................       (2,249)      (1,338)
      Increase in accounts payable, customer advances and accrued expenses..............       37,104       34,079 
Net cash (used) provided by operating activities........................................     (209,215)      31,739 

CASH FLOWS FROM FINANCING ACTIVITIES                                                                               
  Increase (decrease) in due to affiliates..............................................      378,322      (35,165)
  Return of additional capital contribution to Duncan Hill..............................         (500)     --      
Net cash provided (used) by financing activities........................................      377,822      (35,165)

CASH FLOWS FROM INVESTING ACTIVITIES                                                                               
  Purchase of property and equipment....................................................      (94,891)     --      

NET INCREASE (DECREASE) IN CASH.........................................................       73,716       (3,426)

CASH--BEGINNING.........................................................................        5,895        9,321 

CASH--ENDING............................................................................  $    79,611  $     5,895 

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY                                                              
  Issuance of 1,100,000 shares of Series B preferred stock to Duncan Hill for the                                  
    assumption of a $300,000 liability..................................................  $   300,000  $   --      

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

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                      

  A. BUSINESS DESCRIPTION AND PRINCIPLES OF CONSOLIDATION--The Havana Group,
Inc. (Company) is in the mail order business and sells to customers throughout  
the United States. The Company sells tobacco, cigars, smoking pipes and         
accessories. Products are purchased from a variety of manufacturers. The        
consolidated financial statements include the accounts of The Havana Group,     
Inc., and its wholly owned subsidiary, Monarch Pipe Company (Monarch). Monarch  
manufactures smoking pipes and sells them exclusively to the Company. All       
significant intercompany accounts and transactions have been eliminated in      
consolidation. The Company grants credit to E. A. Carey Tobacco Club members.   

B. REORGANIZATION--The Havana Group, Inc. was formed as a wholly-owned  
subsidiary of Duncan Hill, Inc. in December 1997. The operations included in the
accompanying financial statements prior to December 1997 are those of E. A.     
Carey of Ohio, Inc. (Carey), which was dissolved as part of the reorganization  
and Monarch Pipe. Carey and Monarch Pipe were both wholly-owned subsidiaries of 
Duncan Hill, Inc. prior to the reorganization. The Company acquired the assets  
and liabilities of Carey and the common stock of Monarch Pipe in the            
reorganization, which was accounted for at historical cost as a reorganization  
of companies under common control.                                              

  C. 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.  

D. 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. 

E. TRADE RECEIVABLES--It is the Company's policy to record accounts     
receivable net of an allowance for doubtful accounts. The allowance was $5,500  
as of December 31, 1997. Bad debt expense was $14,041 and $41,942 for the years 
ended December 31, 1997 and 1996, respectively.                                 

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

G. Deferred catalog expenses are costs of catalogues mailed to customers
which are deferred and amortized over periods ranging from four weeks to six    
months, the estimated length of time customers utilize catalog and other mail   
order mailings. Catalog expense was $263,675 and $332,629 for the years ended   
December 31, 1997 and 1996, respectively.                                       

H. 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 $1,074 for the year    
ended December 31, 1997. There was no depreciation expense for the year ended   
December 31, 1996.                                                              

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

I. A customer list was obtained in the acquisition of Carey in 1984 for 
$889,000. The acquisition was consummated primarily to obtain Carey's mailing   
list. The list is being amortized on a straight-line basis through 2008. At     
December 31, 1997, accumulated amortization was $424,521.                       

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                          
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. PER SHARE AMOUNTS--Net income per share is calculated using the weighted
average number of shares outstanding during the year. Duncan Hill, Inc., the    
Company's parent, holds 1,000,000 shares of common stock which were assumed to  
be outstanding during 1997 and 1996 for purposes of the basic earnings per share
calculation. Duncan Hill, Inc. also holds 1,100,000 convertible preferred Class 
B shares that were not included in the computation of diluted earnings per share
because the Company had a net loss and inclusion would therefore be             
antidilutive. Additionally conversion is contingent upon the Company attaining  
pre-tax profit of $500,000 in any calendar year.                                

   L. NEW AUTHORITATIVE PRONOUNCEMENTS--Effective January 1, 1996, the Company
adopted the provisions of Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived     
Assets to be Disposed of." SFAS 121 requires the Company to review long-lived   
assets and certain identifiable intangibles, including goodwill, for impairment 
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.                                                

The adoption of SFAS 121 did not have an effect on the Company's        
consolidated financial statements.                                              

In October 1995, Statement of Financial Accounting Standards No. 123,   
"Accounting for Stock-Based Compensation," was issued which establishes         
accounting and reporting standards for stock-based compensation plans. This     
standard encourages the adoption of the fair value-based method of accounting   
for employee stock options or similar equity instruments, but continues to allow
the Company to measure compensation cost for those equity instruments using the 
intrinsic value-based method of accounting prescribed by Accounting Principles  
Board Opinion No. 25, Accounting for Stock Issued to Employees. The Company uses
the intrinsic value-based method for stock-based compensation to employees. As a
result, this standard does not have any effect to the Company's consolidated    
financial statements other than to require disclosure of the pro forma effect on
net (loss) of using the fair value-based method of accounting.                  

  In February 1997, SFAS 128, "Earnings per Share" and SFAS 129, "Disclosure
of Information About Capital Structure," were issued. SFAS 128 establishes new  
standards for computing and reporting earnings per share.                       

  SFAS 129 requires an entity to explain the pertinent rights and privileges
of outstanding securities. The Company adopted these new standards in the period
ended December 31, 1997. All prior period earnings per share data have been     
restated for the adoption of SFAS 128. The effect of adoption was not material. 

In June 1997, the Financial Accounting Standards Board issued SFAS 130, 
"Reporting Comprehensive Income," which is effective for periods beginning after
December 15, 1997. SFAS No. 130 established new standards for reporting         
comprehensive income and its components. The Company expects that comprehensive 
income (loss) will not be materially different from net income (loss).          

In June 1997, the Financial Accounting Standards Board issued SFAS 131, 
"Disclosure About Segments of an Enterprise and Related Information." SFAS 131  
changes the standards for reporting financial results by operating segments,    
related products and services, geographical areas and major                     

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                          
customers. The Company must adopt SFAS 131 no later than December 31, 1998. The 
Company believes that the effect of adoption will not be material.              

  M. RECLASSIFICATION--Certain amounts in the 1996 financial statements have
been reclassified to conform to the 1997 presentation.                          

NOTE 1. INVENTORIES                                                             

Inventories consist of the following at December 31, 1997:              

                                                                [Download Table]
                                                                             
Raw materials.....................................................  $ 107,994
Pipes.............................................................     58,647
Tobacco and cigars................................................    244,800
Accessories.......................................................     20,177
Supplies and catalogues...........................................     46,289
                                                                    ---------
                                                                    $ 477,907
                                                                    ---------
                                                                    ---------

NOTE 2. INCOME TAXES                                                            

The Company accounts for income taxes in accordance with Statement of   
Financial Accounting Standard 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,    
1997:                                                                           

                                                                [Download Table]
                                                                              
Deferred tax asset for net operating loss carryforward............  $ 124,270 
Valuation allowance...............................................    (76,613)
                                                                    --------- 
      Total deferred tax assets...................................     47,657 
                                                                    --------- 
Deferred tax liabilities:                                                     
  Deferred catalog expense........................................    (18,422)
                                                                    --------- 
  Depreciation....................................................       (165)
      Total deferred tax liabilities..............................    (18,587)
                                                                    --------- 
Net deferred tax asset............................................  $  29,070 
                                                                    --------- 
                                                                    --------- 

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.                        

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. INCOME TAXES (CONTINUED)                                                
The Company has net operating loss carryforwards which will expire as   
follows:                                                                        

                                                                [Download Table]

YEAR                                                              AMOUNT  
--------------------------------------------------------------  ----------
                                                                          
2008..........................................................  $    6,500
2009..........................................................      57,600
2010..........................................................     105,900
2011..........................................................     121,000
2012..........................................................      74,500
                                                                ----------
                                                                $  365,500
                                                                ----------
                                                                ----------

NOTE 3. PARENT CORPORATION                                                      

Effective January 1, 1997, the Company contracted with Kids Stuff, Inc. 
("Kids"), a subsidiary of Duncan Hill, Inc., to provide telemarketing, order    
fulfillment, data processing and certain administrative functions. The Company  
is charged for its portion of the expenses on a direct cost basis, as           
applicable, or on a pro rata basis. Actual costs are those direct costs that can
be charged on a per order or per hour basis, fixed costs are allocated on a pro 
rata basis by dividing the total assets of the Company by the sum of the total  
assets of the Company and Kids. Effective January 1, 1998, the Company renewed  
this contract with Kids at an annual cost of approximately $206,100 for the     
administrative, executive and accounting services, as outlined below, and $2.40 
per order processed. The Company is also obligated to pay 5% of its 1998 pre-tax
profit to Kids in connection with those administrative and fulfillment services.
Management believes that this is substantially the same cost that it would incur
should it procure these services itself.                                        

                                                                [Download Table]
                                                                             
Accounting and Payroll Services...................................  $  34,000
Administration and Human Resource Management......................     51,600
Data Processing...................................................     34,900
Office Equipment and Facilities Use...............................     32,200
Merchandising and Marketing Services..............................     38,100
Purchasing Services...............................................     15,300
                                                                    ---------
      Total.......................................................  $ 206,100
                                                                    ---------
                                                                    ---------

  Prior to 1997, these services were provided by Duncan Hill, Inc. and Kids,
as applicable. Total costs allocated to the Company were $450,443 and $511,472  
in 1997 and 1996, respectively.                                                 

    The accounts receivable and inventory of the Company and Kids are pledged as
collateral which guarantees an $800,000 line of credit reflected on the         
financial statements of Kids. The Company's guarantee relative to the line of   
credit is irrevocable. The balance on the line of credit was $671,000 at        
December 31, 1997.                                                              

NOTE 4. STOCKHOLDER'S EQUITY                                                    

A. COMMON STOCK                                                         

    The Havana Group, Inc. has 25,000,000 shares of $.001 par value Common Stock
authorized. In connection with the reorganization discussed in Note B, the      
Company issued 1,000,000 shares to its parent, Duncan Hill, Inc. The holders of 
Common shares are entitled to one vote on all stockholder matters.              

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4. STOCKHOLDER'S 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 Series Preferred Stock.                                       

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.                                       

On December 24, 1997, the Company issued 5,000,000 shares of Series A   
Preferred Stock (Series A), $.001 par value to Duncan Hill, Inc. 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.                                                                          

C. SERIES B PREFERRED STOCK                                             

 On December 24, 1997, the Company issued 1,100,000 shares of its Series B
Convertible Preferred Stock (Series B) $.001 par value to Duncan Hill. In       
return, Duncan Hill assumed a $300,000 liability due to an affiliate. 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,     
annual dividends at the rate of $.10 per share and, no more, payable out of     
surplus or net profits of the Company on a quarterly basis. As the Series B     
Preferred pays a $.10 dividend per share, the Company has recorded the Series B 
stock at $1.00 per share to reflect its estimated fair value.                   

    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,    
which is subordinated to the liquidation preference of the Series A stock.      

D. In December 1997, the Company issued 138,000 warrants to Duncan Hill,
Inc. Upon completion of the Company's initial public offering, these warrants   
automatically convert into Class A Warrants identical to those to be sold to the
public.                                                                         

E. SALE OF UNREGISTERED SECURITIES                                      

   In January 1998, the Company borrowed $100,000 from one private investor in
exchange for a convertible promissory note (Convertible Note). The Convertible  
Note bears interest at 8% per annum and is payable on December 31, 1998.        
However, if the Company completes its initial public offering, the note is      
automatically converted into an aggregate of 400,000 shares of Common Stock and 
1,400,000 Class                                                                 

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4. STOCKHOLDER'S EQUITY (CONTINUED)                                        
A warrants. In accordance with APB 14 and EITF Topic No. D-60, the beneficial   
conversion feature (in the amount of $3,350,000) of the note will be recognized 
as additional paid-in capital and charged to interest expense over the term of  
the note.                                                                       

  Each warrant allows the holder to purchase a share of the Company's Common
Stock at an exercise price of $5.25 per share. The warrants are exercisable upon
the separation date to be determined and expire five years from the effective   
date of the Company's initial public offering. The warrants may be redeemed by  
the Company at a price of $.01 per warrant, at any time after they become       
exercisable, upon not less than 30 days' prior notice, if the closing bid price 
of the Common Stock has been at least $10.50 per share for 20 consecutive       
trading days ending on the fifteenth day prior to the date on which the notice  
of redemption is given.                                                         

NOTE 5. BRIDGE LOAN                                                             

In January 1998, the Company borrowed $100,000 from one private investor
evidenced by a promissory note of $100,000. This is the same private investor   
mentioned in Note 4E, "Sale of Unregistered Securities." The note bears interest
at 8% per annum and is due at the earlier of December 31, 1998, or the          
successful completion of the Company's initial public offering.                 

NOTE 6. INCENTIVE PLANS                                                         

STOCK INCENTIVE PLAN                                                    

During 1997, the Company adopted 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 1997.                            

NOTE 7. EMPLOYMENT AGREEMENT                                                    

  The Company has 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. The employment agreement also provides for the   
eligibility of Mr. Miller to receive annual cash bonuses under the Company's    
Incentive Compensation Plan, of a maximum of 50% of Mr. Miller's prior year's   
base salary.                                                                    

  Mr. Miller was granted under his employment agreement 200,000 Common Stock
Purchase warrants at $6.00 per share. The warrants are convertible into Class A 
warrants upon the effectiveness of the Company's planned registration statement,
bearing the same terms and conditions as those Class A warrants issued by the   
Company being registered.                                                       

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THE HAVANA GROUP, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7. EMPLOYMENT AGREEMENT (CONTINUED)                                        
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      
adjustments in the exercise price if the Company meets certain performance      
goals.                                                                          

 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.                                          

NOTE 8. FAIR VALUE OF STOCK BASED COMPENSATION                                  

 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 at    
$6.00 per share issued to Mr. Miller (both described in Note 7), the Company has
granted options to purchase 60,000 shares of common stock to certain directors  
with the same terms as the options granted to Mr. Miller.                       

As described in Note L, 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 $1,382,000 or $1.38 per share for the year ended December 31,     
1997.                                                                           

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, 45% volatility, an expected life of 50% of 
the ten-year option terms, and a risk-free interest rate of 6.3%.               

NOTE 9. PUBLIC OFFERING                                                         

   In February 1998, the Company filed a registration statement relating to an
offering by the Company of 529,000 units at an offering price of $6 per unit,   
including 69,000 units to cover over-allotments, if any, each unit consisting of
one share of common stock, $.001 par value, and two Class A Warrants. The over- 
allotment, if exercised, will be sold on behalf on Duncan Hill out of the       
1,000,000 shares of Common stock and 138,000 Class A Warrants owned by Duncan   
Hill, with net proceeds to be received by Duncan Hill.                          

   The common stock and warrants are not detachable or separately transferable
until the separation date. Each warrant entitles the holder to purchase one     
share of common stock at a price of $5.25 commencing from the separation date   
until five years from the date of this prospectus. The Company may redeem the   
Warrants at a price of $.01 per Warrant, at any time after they become          
exercisable, 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 on the fifteenth day prior to the date on which 
the notice of redemption is given.                                              

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    NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE 
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR         
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A   
SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK AND WARRANTS OFFERED 
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT 
AUTHORIZED OR IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER ANY 
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS 
OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.                          

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

TABLE OF CONTENTS 

                                                                [Download Table]
                                                  
Available Information..................          4
Prospectus Summary.....................          5
Risk Factors...........................         11
Use of Proceeds........................         23
Dividend Policy........................         24
Dilution...............................         25
Capitalization.........................         27
Selected Financial Data................         28
Management's Discussion and Analysis of           
  Financial Condition and Results of              
  Operations...........................         29
The Company and Its Parent.............         32
Business...............................         34
Management.............................         42
Principal and Selling Stockholders.....         49
Certain Transactions...................         51
Description of Securities..............         53
Unregistered Shares Eligible for                  
  Immediate and Future Sale............         56
Underwriting...........................         57
Selling Security Holders...............         61
Legal Matters..........................         63
Experts................................         63
Index to Financial Statements..........        F-1

UNTIL            , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SHARES OF UNITS, COMMON STOCK AND WARRANTS OFFERED
HEREBY, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO    
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO       
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR      
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.                                             

460,000 UNITS 

EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK AND TWO CLASS A COMMON STOCK
PURCHASE WARRANTS 

THE HAVANA GROUP, INC.

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

PROSPECTUS

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

VTR CAPITAL, INC. 

MAY   , 1998

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

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424A’ Filing		Date		First		Last			Other Filings
		11/8/07		50
		12/31/02		16		52			10KSB,  NT 10-K
		1/1/01		51		81
		1/1/00		51		81
		1/1/99		51		81
		12/31/98		28		80			10KSB,  NT 10-K
		9/30/98		46					10QSB
		9/17/98		19		45
Filed on:		5/1/98		2
		4/17/98		3					SB-2/A
		4/15/98		17		56
		4/10/98		23		65
		3/31/98		57		59			SB-2/A
		3/20/98		45
		2/20/98		23		65
		2/10/98		70
		1/23/98		24		67
		1/1/98		20		81
		12/31/97		10		81
		12/24/97		79
		12/15/97		37		76
		12/8/97		10		57
		12/5/97		10		38
		12/1/97		48		81
		11/26/97		10
		7/1/97		37		56
		6/30/97		34		56
		6/20/97		21		44
		1/1/97		11		78
		12/31/96		17		75
		1/1/96		73		76
		12/31/95		17		48
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