UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: (date of earliest event reported): August 4, 2000
THE HAVANA GROUP, INC.
(Exact name of registrant as specified in its charter)
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Delaware 000-24269 34-1454529
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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5701 Mayfair Road, North Canton, Ohio 44720
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 492-8090
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Item 2. Acquisition or Disposition of Assets.
On August 4, 2000, the Registrant entered into an agreement with John
S. Parker, Priscilla H. Parker, Jerold E. Christensen and Linda L. Christensen
(the "Sellers") and acquired 100% of the capital stock of Phillips & King
International, Incorporated ("P&K") in exchange for (i) 450,000 restricted
shares of the Registrant's Common Stock with piggy- back registration rights,
(ii) $900,000 in cash which was paid directly to P&K on behalf of Sellers, and
(iii) assumption of liabilities estimated at approximately $1,960,000.
Contemporaneous with the acquisition of P&K, the Registrant entered into 90 day
transitional consulting contracts with John S. Parker and Jerold E. Christensen
and agreements not to compete for a period of two years.
The final purchase price was arbitrarily determined based upon the
payment of approximately one dollar of consideration for each one dollar of
assets owned by P&K as of June 30, 2000, with closing combined assets to be not
less than $3,000,000 without the Registrant's consent and liabilities not to
exceed $1,960,000. This transaction will be accounted for under the purchase
method of accounting.
The cash utilized by the Registrant as part of the purchase price was
paid from the Registrant's working capital. Prior to the completion of the
Registrant's acquisition of P&K, there was no prior relationship between the
persons affiliated with P&K and persons affiliated with the Registrant, except
that the Registrant purchased a portion of its inventory from P&K.
P&K was organized in 1906 by Mr. Harry Phillips. P&K is a wholesale
distributor of tobacco, cigar, pipe and related smoking products. P&K sells
tobacco products to retail shops and it has approximately 3,000 accounts. The
method of sale is by direct contact and P&K employs nine sales representatives
in its business. The assets of P&K acquired by the Registrant will continue to
be utilized in the same line of business as that conducted before the
transaction. P&K's principal assets include, without limitation, inventories,
customer lists and accounts receivable.
During the 1997-1998 peak in premium cigars, Cuba Libre Humidors, Inc.
("Cuba Libre") claimed to have received a verbal purchase order for
humidification devices for continuous monthly sale to P&K. This did not happen,
Cuba Libre filed a law suit and was awarded a judgment of $1.8 million. P&K
responded by filing for protection under Chapter 11 of the Bankruptcy Code and
began defensive actions. This action was settled on August 4, 2000 and as part
of the Plan of Reorganization, P&K paid $300,000 in cash and issued notes in
favor of Cuba Libre including: (a) an unsecured note for $400,000 in the
principal amount with interest at 7% per annum and payable in quarterly
installments with the balance due on or before May 1, 2005; and (b) an unsecured
Note in the amount of $125,000 in principal amount without interest for the
first two years and to bear interest at 7% beginning on the third year to be
paid in quarterly installments with the balance due on or before May 1, 2005.
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Until its Chapter 11 filing, P&K operated as a subchapter S corporation
under the United States Tax Code of 1986, as amended. Prior to the Registrant's
acquisition of P&K received a Confirmation Order confirming a Plan of
Reorganization which has become a final Order and no timely Order has been filed
as of August 4, 2000, the closing date and the effective date of the Plan of
Reorganization.
Item 7. Financial Statements and Exhibits
(a) - (b) The financial statements of P&K for the two years ended December
31, 1999 and the pro-forma financial statements of P&K and the Registrant will
be filed within 60 days of the due date of this Form 8-K. The Registrant has
engaged Stonefield Josephson, Inc., as independent auditors to perform the audit
of P&K.
(c) Exhibits. The following exhibits are furnished in accordance with the
provisions of Item 601 of Regulation S-B.
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Exhibit No. Description
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2 Stock Purchase Agreement dated August 4, 2000 by and
among the Registrant and John S. Parker, Priscilla H. Parker,
Jerold E. Christensen and Linda L. Christensen
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE HAVANA GROUP, INC.
By: /s/ William L. Miller
William L. Miller, Chief Executive Officer
Date: August 16, 2000
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