HAVANA GROUP INC, 424B3, 1999-01-05

HAVANA GROUP INC
424B3, 1999-01-05
CATALOG & MAIL-ORDER HOUSES

Previous: RESIDENTIAL ASSET FUNDING CORP, 8-K, 1999-01-05

Next: PROVANT INC, S-1, 1999-01-05

<PAGE>

SUPPLEMENT TO THE HAVANA GROUP, INC.'S PROSPECTUS
DATED MAY 14, 1998
Filed Pursuant to Rule 424B(3) On Registration Statement No. 333-45863

In May 1998, The Havana Group, Inc. completed an initial public
offering of 460,000 Units, each Unit consisting of one share of Common Stock and
two Class A Warrants to purchase Common Stock as more fully described in
Havana's prospectus dated May 14, 1998. Subsequently, Duncan Hill, Inc. sold
69,000 Units to the Underwriters pursuant to an over-allotment option granted to
them as more fully described in the prospectus.

The prospectus also references a concurrent offering which is being
offered pursuant to an alternative prospectus. In the concurrent offering, ARO
Trust No. 1, 1960 Trust, intends to sell its 400,000 shares of Havana's Common
Stock and 1,400,000 Class A Warrants through S.G. Cowen Securities Corporation
from time to time in ordinary broker's transactions at market prices prevailing
at the time of sale. S.G. Cowen Securities Corporation would receive
compensation of approximately $.05 per security. William Miller, also a selling
security holder as to 200,000 Class A Warrants, does not currently have any
specific plans, proposals, agreements, arrangements or understandings with
respect to the sale of his Class A Warrants as of the date of this supplement.
In this respect, a post-effective amendment to the Registration Statement of
which this prospectus is a part will be required in the event ARO Trust No. 1,
1960 Trust or Mr. Miller enters into new agreements, arrangements or
understandings not disclosed in this prospectus or supplement thereto. It should
be noted that Duncan Hill is no longer a selling security holder in the
concurrent offering.

The date of this Supplement is January 4, 1999.

S-1
<PAGE>

The following "Selling Security Holders" section replaces the same
section in Havana's Prospectus dated May 14, 1998.

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
William Miller and the exercise of such 200,000 Class A Warrants by the
transferees of Mr. Miller. (The Bridge Lender and Mr. Miller 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 Supplement. The Class A Warrants held by the Selling Security
Holders are identical to the Class A Warrants sold in the Company's recently
completed initial public offering. 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 Company's securities offered hereby. See "Certain Transactions"
and "Risk Factors--Potential Adverse Effect of Redemption or Exercise of Class A
Warrants."

Except for Mr. 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 as of the date of this Supplement (i.e., prior to the Offering and
subsequent to the Company's initial public offering) and after the Offering by
Selling Security Holders, 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)

Percent of Common Stock
Name of Beneficial Owner Common Stock Owned Owned%
- ------------------------ ---------------------------- ----------------------------
Prior to After Prior to After
Offering(1) Offering Offering Offering
----------- -------- -------- --------
<S> <C> <C> <C> <C>
ARO #1 1970 Trust
Linda Gallenberger,
Trustee (1) 400,000 -0- 21.5 0

</TABLE>

S-2
<PAGE>
<TABLE>
<CAPTION>

TABLE II (Class A Warrants)

Class A Warrants Percent of Class A
Name of Beneficial Owner Owned Warrants Owned%
- ------------------------ ---------------------------- -------------------------------
Prior to After Prior to After
Offering Offering Offering Offering
<S> <C> <C> <C> <C>
ARO #1 1970 Trust
Linda Gallenberger,
Trustee (1) 1,400,000 -0- 57.0 -0-

William L. Miller 200,000 -0- 8.1 -0-

</TABLE>

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

(1) 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 Stockholders."

Miller is the Company's Chief Executive Officer. 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 Class A Warrants offered hereby may be sold from time to time
directly by Mr. Miller. Alternatively, Mr. Miller may from time to time offer
such securities through underwriters, dealers or agents. The distribution of
Class A Warrants by Mr. Miller 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 Mr. Miller in connection with such
sales of securities. Mr. Miller 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.

ARO #1 1960 Trust (the "Trust"), the other remaining Selling Security
Holder, has notified the Company of its intention to sell the Securities held by
it through SG Cowen Securities Corporation from time to time. The distribution
of Securities by the Trust may

S-3

<PAGE>

be effected in one or more transactions that may take place on the
over-the-counter market, in ordinary broker's transactions, at market prices
prevailing at the time of sale. Usual and customary brokerage fees or
commissions will be paid by the Trust in connection with such sales of
Securities. The amount of the markdown or commissions to be charged by SG Cowen
Securities Corporation will depend upon the size and volume of trading activity
at that time but is anticipated to be approximately $.05 per security. The Trust
and any intermediaries through whom the aforesaid Securities are sold may be
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended (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 Supplement, the Trust and SG Cowen Securities
Corporation have advised the Company that they do not have any other current or
future plans, proposals, agreements, arrangements or understandings known to the
Trust or SG Cowen Securities Corporation with respect to engaging in
transactions with or by the Trust not disclosed herein. It should also be noted
that William Miller, the other Selling Security Holder, does not currently have
any plans, proposals, agreements, arrangements or understandings with respect to
engaging in transactions with respect to the Securities owned by him. The
Company has filed an undertaking with the Commission to file a post-effective
amendment to its Registration Statement upon the development of any new plan,
proposal, agreement or understanding of or known to the Company or the
underwriters who participated in the Company's initial public offering,
including Fairchild Financial Group, Inc., ("Fairchild"), formerly VTR Capital,
Inc., the managing underwriter of the Company's initial public offering, with
respect to transactions with or by the Selling Security Holders not previously
disclosed in the Prospectus or the supplement thereto.

In the event that any new arrangements are entered into with Fairchild
or another broker-dealer which are different from those disclosed in the
Prospectus or a supplement thereto, such Post-Effective Amendment will include a
prospectus 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 new underwriters, dealers or agents, if any, the intended
purchase price or method of determining the purchase price to be 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
to be paid to underwriters, dealers or agents and the proposed selling price to
the public or method of determining the selling price.

Under the Securities Exchange Act of 1934 (the "Exchange Act"), and the
regulations thereto, any other 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

S-4

<PAGE>

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.

S-5
<PAGE>

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 immediately detachable and separately transferable from
each other at anytime after the date of this Prospectus. Each Class A Warrant
entitles the holder to purchase one share of Common Stock at a price of $5.25
and is exercisable at anytime over a period of 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 23.

---------------------
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.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE DISCOUNTS PROCEEDS TO SELLING
TO AND TO UNIT
PUBLIC COMMISSIONS(1) COMPANY(2) HOLDER
<S> <C> <C> <C> <C>
Per Unit............................ $6.00 $0.60 $5.40 $5.40
Total(3)............................ $2,760,000 $276,000 $2,484,000 $-0-
</TABLE>
(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 14, 1998.

<PAGE>
INSERT COLOR PHOTOS

2
<PAGE>
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 "HVGPU," "HVGP," and "HVGPW,"
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 May ,
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."

<PAGE>
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.

4
<PAGE>
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,

5
<PAGE>
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]

<PAGE>
THE OFFERING

<TABLE>
<S> <C>
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 immediately detachable and separately
transferable from each other at any time after the date of
this Prospectus. Each Class A Warrant entitles the holder
to purchase one share of Common Stock at a price of $5.25
and is exercisable at anytime over a period of 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 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
</TABLE>

7
<PAGE>

<TABLE>
<S> <C>
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."
</TABLE>

8
<PAGE>
CAPITALIZATION

<TABLE>
<S> <C>
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............................................ HVGPU

Common Stock..................................... HVGP

Warrants......................................... HVGPW
</TABLE>

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

(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.

9
<PAGE>
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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
<S> <C> <C> <C>
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)
------------ -------------- -------------
<S> <C> <C> <C>
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
</TABLE>

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

(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.

10
<PAGE>
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
Stock (1,100,000 shares) which also has the same voting

11
<PAGE>
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."

12
<PAGE>
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

13
<PAGE>
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.

14
<PAGE>
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
litigation are seeking compensatory and, in some cases,

15
<PAGE>
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.

16
<PAGE>
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.

17
<PAGE>
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

18
<PAGE>
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").

19
<PAGE>
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."

20
<PAGE>
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

21
<PAGE>
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."

22
<PAGE>
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:

<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
AMOUNT OF PERCENTAGE OF
NET PROCEEDS NET PROCEEDS
------------ ---------------
<S> <C> <C>
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%
========== ===
</TABLE>

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

(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

23
<PAGE>
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.

24
<PAGE>
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:

<TABLE>
<S> <C> <C>
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
=========

</TABLE>

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.

<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
PERCENTAGE TOTAL CASH PERCENTAGE OF AVERAGE
SHARES OF TOTAL CONSIDERATION TOTAL PRICE PER
PURCHASED SHARES % $ CONSIDERATION % SHARE $
---------- --------------- ------------- ------------------- -----------
<S> <C> <C> <C> <C> <C>

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

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

(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.

25
<PAGE>
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.

26
<PAGE>
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.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------
<S> <C> <C>
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
============ =============
</TABLE>

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

(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.

27
<PAGE>
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.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
<S> <C> <C> <C>
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
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>

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

(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.

28
<PAGE>
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

29
<PAGE>
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

30
<PAGE>
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.

31
<PAGE>
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.

32
<PAGE>
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.

33
<PAGE>
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 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.

34
<PAGE>
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

35
<PAGE>
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.

36
<PAGE>
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

37
<PAGE>
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

38
<PAGE>
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.

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

39
<PAGE>
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

40
<PAGE>
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.

41
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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

<TABLE>
<CAPTION>
NAME AGE POSITION
- - ------------------------------------ --- -------------------------------------------------
<S> <C> <C>

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
</TABLE>

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.

42
<PAGE>
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.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
- ------------------------------------------------------------------ --------------------------------
AWARDS
--------------------------------

<CAPTION>
(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
- -------------------------- --------- ----------- --------------- ------------------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
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-

<CAPTION>
AN
- --------------------------
<S> <C> <C>
PAYOUTS
-------------
(A) (H) (I)
ALL
LTIP OTHER
NAME AND PAYOUTS COMPENSATION
PRINCIPAL POSITION ($) ($)
- - ------------------------- ------------- -------------------
<S> <C> <C>
William Miller........... -0- -0-
Chief Executive -0- -0-
Officer(2) -0- -0-
</TABLE>

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

(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.

43
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZED VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
FOR OPTION/WARRANT
INDIVIDUAL GRANTS TERM(2)
- ----------------------------------------------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
(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% ($)
- --------------------------------------------- ----------- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>

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

(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

<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)

<S> <C> <C> <C> <C>
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
</TABLE>

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

(1) The aggregate dollar values in column (c) and (e) are calculated by
determining the difference between the fair market value of the Common Stock
underlying the options/warrants and the exercise price of the
options/warrants at exercise or fiscal year end, respectively, assuming the
conversion of outstanding warrants into Class A Warrants.

44
<PAGE>
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

45
<PAGE>
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

46
<PAGE>
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

47
<PAGE>
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.

48
<PAGE>
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.

<TABLE>
<CAPTION>
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)
- ---------------------------------------- -------------- ----------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>

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

* 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.

49
<PAGE>
(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.

<TABLE>
<CAPTION>
PERCENTAGE
AFTER THE
NAME AMOUNT OFFERING
- ---------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
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
</TABLE>

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

(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."

50
<PAGE>
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.

51
<PAGE>
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."

52
<PAGE>
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 immediately detachable and separately transferable from
each other at anytime after the date of this Prospectus.

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 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.

53
<PAGE>
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 date of this Prospectus
and expiring May 14, 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 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

54
<PAGE>
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.

55
<PAGE>
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.

56
<PAGE>
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.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF UNITS
- ------------------------------------------------------------------------------ ---------------
<S> <C>

VTR Capital, Inc............................................................. 335,000
IAR Securities Corp. ........................................................ 125,000
-------
Total.................................................................... 460,000
=======
</TABLE>

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.

57
<PAGE>
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

58
<PAGE>
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

59
<PAGE>
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

60
<PAGE>
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)

PERCENT OF
COMMON STOCK OWNED COMMON STOCK OWNED%
--------------------- ------------------------
<S> <C> <C> <C> <C>
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
</TABLE>

61
<PAGE>
TABLE II (CLASS A WARRANTS)

<TABLE>
<CAPTION>
CLASS A WARRANTS PERCENT OF CLASS A
OWNED WARRANTS OWNED%
------------------------- --------------------------
<S> <C> <C> <C> <C>
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-
</TABLE>

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

(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."

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.

62
<PAGE>
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.

63
<PAGE>
THE HAVANA GROUP, INC. AND SUBSIDIARY

CONTENTS

<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
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
</TABLE>

F-1
<PAGE>
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

F-2
<PAGE>
THE HAVANA GROUP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1997

<TABLE>
<S> <C>
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
==========
</TABLE>

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

F-3
<PAGE>
THE HAVANA GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
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)
============ ============
</TABLE>

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

F-4
<PAGE>
THE HAVANA GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
COMMON PREFERRED PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
----------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>

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
</TABLE>

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

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
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 $ --
</TABLE>

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

F-6
<PAGE>
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.

F-7
<PAGE>
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

F-8
<PAGE>
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:

<TABLE>
<S> <C>
Raw materials..................................................... $ 107,994
Pipes............................................................. 58,647
Tobacco and cigars................................................ 244,800
Accessories....................................................... 20,177
Supplies and catalogues........................................... 46,289
---------
$ 477,907
=========
</TABLE>

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:

<TABLE>
<S> <C>
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
=========
</TABLE>

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

F-9
<PAGE>
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:

<TABLE>
<CAPTION>
YEAR AMOUNT
- - -------------------------------------------------------------- ----------
<S> <C>
2008.......................................................... $ 6,500
2009.......................................................... 57,600
2010.......................................................... 105,900
2011.......................................................... 121,000
2012.......................................................... 74,500
----------
$ 365,500
==========
</TABLE>

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.

<TABLE>
<S> <C>
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
=========
</TABLE>

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.

F-10
<PAGE>
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

F-11
<PAGE>
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 for a period of 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.

F-12
<PAGE>
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 immediately detachable and separately
transferable from each other as of the date of the Prospectus. Each warrant
entitles the holder to purchase one share of common stock at a price of $5.25
commencing from the date of the Prospectus until five years thereafter. 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.

F-13

<PAGE>
================================================================================
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

Prospectus Summary............................. 5
Risk Factors................................... 11
Use of Proceeds of Company Offering ........... 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
</TABLE>

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

UNTIL AUGUST 12, 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.

469,000 SHARES
OF
COMMON STOCK

1,738,000
CLASS A
COMMON STOCK
PURCHASE WARRANTS

THE HAVANA GROUP, INC.

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

PROSPECTUS

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

MAY 14, 1998

================================================================================
<PAGE>
SUPPLEMENT TO THE HAVANA GROUP, INC.'S ALTERNATE PROSPECTUS
DATED MAY 14, 1998
Filed Pursuant to Rule 424B(3) On Registration Statement No. 333-45863

This prospectus includes a Concurrent Offering. In the Concurrent
Offering, ARO Trust No. 1, 1960 Trust, intends to sell its 400,000 shares of
Havana's Common Stock and 1,400,000 Class A Warrants through S.G. Cowen
Securities Corporation from time to time in ordinary brokers transactions at
market prices prevailing at the time of sale. S.G. Cowen Securities Corporation
would receive compensation of approximately $.05 per security. William Miller,
also a selling security holder as to 200,000 Class A Warrants, does not
currently have any specific plans, proposals, agreements, arrangements or
understandings with respect to the sale of his Class A Warrants as of the date
of this supplement. In this respect, a post-effective amendment to the
Registration Statement of which this alternate prospectus is a part will be
required in the event ARO Trust No. 1, 1960 Trust or Mr. Miller enters into new
agreements, arrangements or understandings not disclosed in this alternate
prospectus or supplement thereto. It should be noted that Duncan Hill is no
longer a Selling Security Holder in the Concurrent Offering.

The date of this Supplement is January 4, 1999.

S-1

<PAGE>

The following "Selling Security Holders" and "Plan of Distribution"
sections replaces the same sections in Havana's Prospectus dated May 14, 1998.

SELLING SECURITY HOLDERS

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 William Miller and the exercise of
such 200,000 Class A Warrants by the transferees of Mr. Miller. (The Bridge
Lender and Mr. Miller 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 Supplement. The Class A Warrants
held by the selling security holders are identical to the Class A Warrants sold
in the Company's recently completed initial public offering. 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 Company's securities offered hereby. See
"Certain Transactions" and "Risk Factors--Potential Adverse Effect of Redemption
or Exercise of Class A Warrants."

Except for Mr. 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 as of the date of this Supplement (i.e., prior to the Offering but
subsequent to the Company's initial public offering) and after the offering by
selling security holders, 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>
<CAPTION>
TABLE I (Common Stock)

Percent of Common Stock
Name of Beneficial Owner Common Stock Owned Owned%
- ------------------------ ------------------ ----------------------------
Prior to After Prior to After
Offering(1) Offering Offering Offering
----------- -------- -------- --------
<S> <C> <C> <C> <C>
ARO #1 1970 Trust
Linda Gallenberger,
Trustee (1) 400,000 -0- 21.5 0

</TABLE>

S-2

TABLE II (Class A Warrants)

Class A Warrants Percent of Class A
Name of Beneficial Owner Owned Warrants Owned%
- ------------------------ -------------------------- ---------------------------
Prior to After Prior to After
Offering Offering Offering Offering
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ARO #1 1970 Trust
Linda Gallenberger,
Trustee (1) 1,400,000 -0- 57.0 -0-
William L. Miller 200,000 -0- 8.1 -0-
</TABLE>
- -------------

(1) 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 Stockholders."

S-3

<PAGE>

market, in ordinary broker's transactions, at market prices prevailing at the
time of sale. Usual and customary brokerage fees or commissions will be paid by
the Trust in connection with such sales of Securities. The amount of the
markdown or commissions to be charged by SG Cowen Securities Corporation will
depend upon the size and volume of trading activity at that time but is
anticipated to be approximately $.05 per security. The Trust and any
intermediaries through whom the aforesaid Securities are sold may be deemed
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Securities offered, and any profits
realized or commissions received may be deemed underwriting compensation.

S-4

<PAGE>

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.

PLAN OF DISTRIBUTION

For a description of the Plan of Distribution for the Selling Security
Holders, see "Selling Security Holders" above.

S-5

<PAGE>

PROSPECTUS

THE HAVANA GROUP, INC.
469,000 SHARES OF COMMON STOCK
1,738,000 CLASS A COMMON STOCK PURCHASE WARRANTS

This Prospectus includes the registration on behalf of a bridge lender (the
"Bridge Lender") as a Selling Security Holder of the (i) resale of 400,000
shares of Common Stock and 1,400,000 Class A Warrants issuable to the Bridge
Lender by The Havana Group, Inc. (the "Company ") upon the completion of the
Company's Initial Public Offering pursuant to a separate Prospectus (the
"Offering") in accordance with the automatic conversion of a convertible note
and (ii) the exercise of such 1,400,000 Class A Warrants by the transferees of
the Bridge Lender. This Prospectus also includes the resale of 200,000 Class A
Warrants owned by William Miller, the Company's Chief Executive Officer
("Miller"), and the 200,000 shares issuable upon exercise thereof by the
transferees of 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 as discussed under "Concurrent Sales" is not
exercised in its entirety, then this Prospectus includes the resale of up to
69,000 Units (identical to those sold in the Offering) to be offered by Duncan
Hill Inc., the Company's sole stockholder prior to the Offering ("Duncan Hill"
or the "Selling Unit Holder"), including the exercise of 138,000 Class A
Warrants by the transferees of Duncan Hill. The securities offered herein may be
sold concurrently with or after the Offering subject to the Company's obligation
under certain circumstances described herein to file a Post-Effective Amendment
to the Registration Statement of which this Prospectus is a part. (The Bridge
Lender, Miller and Selling Unit Holder are hereinafter collectively referred to
as the "Selling Security Holders.") The aforementioned securities in the
aggregate are collectively referred to as the "Securities." For a description of
the Offering, see "Concurrent Sales."

Each Class A Warrant entitles the holder to purchase one share of Common
Stock at a price of $5.25 and are exercisable anytime after the date of this
Prospectus until May 14, 2003. 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 NEXT PAGE)

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 23.

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

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.

The date of this Prospectus is May 14, 1998

<PAGE>
(CONTINUED FROM PREVIOUS PAGE)

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

As of the date of this Prospectus, the Selling Security Holders and the
Underwriters (including VTR Capital Inc., 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 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.

On the date hereof, the Company commenced an initial public offering of
460,000 Units, each Unit consisting of one share of common stock, $.001 par
value and two redeemable Class A Common Stock Purchase Warrants. The Offering
also included an Over-Allotment Option pursuant to which the Underwriters may
purchase up to 69,000 Units from Duncan Hill. See "Concurrent Sales."

The Company will not receive any of the proceeds for the sale of the
Securities by the Selling Security Holders. All costs incurred in the
registration of the Securities of the Selling Security Holders are being borne
by the Company. See "Selling Security Holders."

Prior to the Offering, there has been no public market for any of the
Company's securities. Accordingly, the offering price of the Units in the
Offering 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 operations of the Company in recent periods, the
prospects of the Company, its capital structure and such other factors as were
deemed relevant.

<PAGE>

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 "HVGPU," 'HVGP'," and "HVGPW," 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 Warrants."

<PAGE>
AVAILABLE INFORMATION

4
<PAGE>
PROSPECTUS SUMMARY

THE COMPANY

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

5
<PAGE>

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 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]

<PAGE>
THE COMPANY OFFERING

Concurrent Offering by Selling
Security Holders.............. The Registration Statement of which this Alternate
Prospectus forms a part 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 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
</TABLE>

7
<PAGE>

8
<PAGE>
CAPITALIZATION

<TABLE>
<S> <C>
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............................................ HVGPU

Common Stock..................................... HVGP

Warrants......................................... HVGPW
</TABLE>

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

9
<PAGE>
SUMMARY FINANCIAL DATA

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

(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.

10
<PAGE>
RISK FACTORS

22
<PAGE>
USE OF PROCEEDS OF COMPANY OFFERING

<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
AMOUNT OF PERCENTAGE OF
NET PROCEEDS NET PROCEEDS
------------ ---------------
<S> <C> <C>
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%
========== ===
</TABLE>

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

(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 expense
allowance which the Company has agreed to pay for the benefit of the Selling
Unit Holder. See "Underwriting."

BRIDGE FINANCING

23
<PAGE>
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.

DIVIDEND POLICY

24
<PAGE>
DILUTION

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

<TABLE>
<S> <C> <C>
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
=========

</TABLE>

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

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

26
<PAGE>
CAPITALIZATION

<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------
<S> <C> <C>
PRO
ACTUAL FORMA(1)
------------ -------------
Stockholders' Equity:

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

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

27
<PAGE>
SELECTED FINANCIAL DATA

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

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

(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.

28
<PAGE>
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

RESULTS OF OPERATIONS

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

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

THE COMPANY AND ITS PARENT

HISTORY OF DUNCAN HILL

THE REINCORPORATION

33
<PAGE>
BUSINESS

GENERAL

STRATEGIES

34
<PAGE>
MERCHANDISING

MARKETING

CUSTOMER SERVICE AND TELEMARKETING

36
<PAGE>
FULFILLMENT AND DELIVERY

INVENTORY/PURCHASING

PRODUCT SOURCING

SEASONALITY

DATA PROCESSING

COMPETITION

TOBACCO INDUSTRY--GOVERNMENT REGULATIONS

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

TOBACCO INDUSTRY LITIGATION

PRODUCT LIABILITY INSURANCE

OTHER REGULATORY MATTERS

PATENTS, TRADEMARKS AND TRADE NAMES

EMPLOYEES

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

LEGAL PROCEEDINGS

41
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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

<TABLE>
<CAPTION>
NAME AGE POSITION
- - ------------------------------------ --- -------------------------------------------------
<S> <C> <C>

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.

EXECUTIVE COMPENSATION

<CAPTION>
(A) (B) (C) (D) (E) (F) (G)

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

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

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

<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)

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

44
<PAGE>
INCENTIVE COMPENSATION PLAN

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

EMPLOYMENT AGREEMENT

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

DIRECTORS COMPENSATION

47
<PAGE>
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

48
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

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

* 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.

(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.

49
<PAGE>
(7) Includes the vested portion of the options granted to him. Does not include
options to purchase an additional 22,500 shares.

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

(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."

50
<PAGE>
CERTAIN TRANSACTIONS

(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.

52
<PAGE>
DESCRIPTION OF SECURITIES

UNITS

COMMON STOCK

PREFERRED STOCK

SERIES A PREFERRED STOCK

53
<PAGE>
SERIES B CONVERTIBLE PREFERRED SHARES

OUTSTANDING WARRANTS

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

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.

55
<PAGE>
UNREGISTERED SHARES ELIGIBLE FOR IMMEDIATE AND FUTURE SALE

56
<PAGE>
CONCURRENT SALES

On the date of this Prospectus, a Registration Statement under the
Securities Act with respect to an underwritten initial public offering (the
"Offering") of securities by the Company was declared effective by the
Securities and Exchange Commission ("SEC"), and the Company commenced the sale
of the securities offered thereby. The securities consist of 460,000 Units, each
Unit consisting of one share of common stock, $.001 par value and two redeemable
Class A Common Stock Purchase Warrants (without giving effect to the
Over-Allotment Option granted to the Representative of the Offering). The
Offering also includes an Over-Allotment Option of up to 69,000 Units which the
Underwriters may purchase from Duncan Hill. To the extent that the
Over-Allotment Option is not exercised in full by the Underwriters in the
Offering, Duncan Hill will be a Selling Security Holder in this Prospectus.
Sales of securities under this Prospectus by the Selling Security Holders or
event the potential of such sales may have an adverse effect on the market price
of the Company's securities.

SELLING SECURITY HOLDERS

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. This 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, this 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 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."

57
<PAGE>
TABLE I (COMMON STOCK)

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

TABLE II (CLASS A WARRANTS)

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

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

(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 Stockholders."

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 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

58
<PAGE>
with or by the Selling Security Holders. The Post-Effective Amendment will
include a prospectus 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.

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.

PLAN OF DISTRIBUTION

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 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. The
Post-Effective Amendment will include a prospectus 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.

LEGAL MATTERS

59
<PAGE>
THE HAVANA GROUP, INC. AND SUBSIDIARY