HARVEY GROUP INC, 10-K, 1995-05-12

HARVEY GROUP INC
10-K, 1995-05-12
RADIO, TV & CONSUMER ELECTRONICS STORES

Previous: HARTFORD LIFE INSURANCE CO, 497J, 1995-05-12

Next: HASBRO INC, 10-Q, 1995-05-12

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10 K

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 28, 1995 Commission
file number 1-4626

THE HARVEY GROUP INC.
(Exact name of registrant as specified in its charter)

New York 13-1534671
(State of other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)

600 Secaucus Road, Secaucus, New Jersey 07094
(Address of principal executive office) (Zip Code)

Registrant s telephone number, including area code 201 865 3418

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered

Common Stock, par value $1 per share American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S K (SECTION229.405 of this chapter)
is not contained herein, and will not be contained, to the best
of registrant s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10 K or any amendment to this Form 10 K [x]

The aggregate market value of the voting stock held by
nonaffiliates of the registrant as of May 8, 1995: common stock,
$1 par value $686,709.

The number of shares outstanding of the registrant s $1 par value
common stock, as of May 8, 1995 was 3,164,887 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement to be prepared in connection with
the 1995 annual meeting of shareholders scheduled to be held on
or about June 28, 1995 are incorporated by reference into Part I
and Part III.

PART I

ITEM 1. BUSINESS

RETAIL ELECTRONICS

The Company, through its Retail Electronics Business, Harvey
Electronics ( Harvey Electronics ), is engaged in the retail
sale, service and custom installation of high quality home audio
and video equipment. This equipment includes high fidelity
components and systems, video cassette recorders, camcorders,
direct view and projection TV sets, digital satellite systems,
cellular and conventional phones, fax machines as well as
accessories for this equipment.

The Company maintains strong relationships with many of the
finest consumer electronics manufacturers in the world. Audio and
video products and custom installation account for virtually all
of Harvey Electronics business. The Company targets upscale
shoppers who base their purchase decisions on quality, features
and reliability along with value.

Prior to fiscal 1990, the Company operated 3 stores (Midtown
Manhattan, New York, White Plains, New York, Paramus, New
Jersey). In May of 1989, the Company purchased the assets of the
Audio Exchange Company and began operating its two existing
stores (Westbury, New York and Greenwich Village, New York) under
the Harvey Electronics name. In March of 1990, the Company opened
an outlet store in Secaucus, New Jersey. In fiscal 1994, the
Company opened a retail store located within ABC Carpet and Home,
a New York City based specialty retailer of high quality home
furnishings and carpeting. In fiscal 1995 the Company opened a
new retail store located on prestigious 57th Street in Manhattan,
bringing the total stores operated by the Company to eight. In
February 1990, Harvey Electronics administrative offices and
main warehouse facility were relocated from New York City to
Secaucus, New Jersey. In fiscal 1993, the Corporate offices were
also relocated to Secaucus, New Jersey from Roslyn Heights, New
York.

The business is seasonal, with greater sales and income being
achieved in the fourth quarter of the fiscal year.

EMPLOYEES

The Company employs approximately 110 full-time employees.
Approximately 65 hourly employees are covered by one labor union
contract expiring on July 31, 1996. Employee relations are
considered to be good and there have been no work stoppages in
the history of the Company. The Company is an Equal Opportunity
Employer.

COMPETITION

Harvey Electronics competes in the Metropolitan New York area
with department stores, mail order houses, discount stores and
numerous other electronic specialty stores. Many of such
competitors sell other lines of merchandise and many have
substantially larger total sales and greater total financial
resources. Management believes that Harvey Electronics competes
on the basis of the high quality of the national brands of audio
and video products which it carries and on its ability to give
customers personalized service, quality home or office
installation and extensive product knowledge.

DISCONTINUED OPERATIONS

On March 31, 1992, the Company completed the sale of certain
assets and the business of its food brokerage division, The
Boerner Company ("Boerner Division"), to Merkert Enterprises,
Inc., a Massachusetts corporation ("Merkert"). Pursuant to the
terms of the Asset Purchase Agreement (the "Agreement"), dated as
of January 17, 1992, and amended as of January 23, 1992, the
Company sold certain tangible and intangible assets and the
business of the Boerner Division, agreed not to compete with
Merkert in the food brokerage business and also agreed to provide
certain consulting services to Merkert.

Pursuant to the Agreement, the purchase price was unsecured and
the Company was to receive an aggregate consideration, payable by
Merkert over five and one-quarter years, equal to approximately
$7,237,000 (which amount includes interest payments, at 12.5% per
annum, and payment of $1,037,000 for substantially all of the
fixed assets of the Boerner Division, which amount was received
by the Company on April 1, 1992). However, the purchase price
was subject to adjustment for, among other things, modification,
resignation or termination by existing principals of the Boerner
Division (including the failure of principals to appoint Merkert
as food broker) during the one year period following the closing
of the transaction. During the period ending March 31, 1993, the
Boerner Division experienced the resignation of certain
principals decreasing the aggregate purchase price to be received
by $610,951. As a result, the present value of the aforementioned
purchase price was reduced, and $238,955 was charged to loss on
Disposal of Discontinued Operations during fiscal 1993.

In conjunction with the successful refinancing effort completed
on May 2, 1994, (see Notes 2 and 4 to the consolidated financial
statements) the Company agreed to the discounting and prepayment
of certain remaining scheduled payments due from Merkert. At
closing, the Company received $2,150,000 from Merkert, of which
$2,100,000 was used to substantially reduce the amount due to
National Westminster Bank USA (the Bank ) (from $2,600,000 to
$500,000). As a result of the discounting and prepayment
agreement with Merkert, the Company recorded a provision to
continuing operations of $320,266 at January 29, 1994.

In accordance with the prepayment agreement, the remaining
installments to be received from Merkert, are as follows:

FISCAL INSTALLMENT
YEAR DATE PAYMENT INTEREST PRINCIPAL

1996 1/1/96 $100,000 $12,901 $87,099

1997 1/1/97 74,000 5,670 68,330
Totals $174,000 $18,571 $155,429

Such remaining installments will be used to pay outstanding
obligations under a lease termination agreement (see Note 8 to
the consolidated financial statements).

Merkert generally did not assume any of the liabilities of the
Company relating to the Boerner Division except for certain motor
vehicle leases, equipment leases and service contracts. The
Company has agreed to indemnify Merkert against any loss, damage
or expense arising out of any liability or any tax of the Company
in respect of the Boerner Division which was not expressly
assumed by Merkert pursuant to the terms of the Agreement.

In accordance with the Agreement, therefore, the Company retained
all remaining liabilities pertaining to the Boerner Division. In
particular, the Company agreed to retain the obligation to pay a
consultant $21,133 per quarter for consulting services provided
with respect to certain principals of Boerner. The agreement
with such consultant commenced on February 2, 1991 and will
terminate according to its terms on November 2, 1995.

EXISTING CREDIT ARRANGEMENTS

On May 2, 1994 the Company successfully completed a refinancing
which included the prepayment and discounting of the receivable
due from Merkert (see Note 2 to the consolidated financial
statements). At closing, the Company received $2,150,000 from
Merkert of which $2,100,000 was used to substantially reduce the
amount due to the Bank (from $2,600,000 to $500,000). The
remaining $500,000 obligation, due to the Bank was converted to a
two year term loan bearing interest at the Bank s prime rate plus
5% per annum and the existing credit facility with the Bank was
cancelled.

The Bank and InterEquity Capital Partners L.P. ( I.E.C.P. ), an
entity which has provided term loans to the Company (see Note 4
to the consolidated financial statements), have entered into an
intercreditor agreement whereby both will share equally in a
subordinated second position to the Company s new lender,
Congress Financial Corporation ( Congress ). The term loan with
the Bank also provides for rights of acceleration upon the
occurrence of certain customary events of default and includes
restrictive covenants similar to those existing with the term
loans from I.E.C.P.

Pursuant to the refinancing effort, the Company entered into a
three year revolving line of credit facility with Congress, dated
May 2, 1994 whereby the Company may borrow up to $3,000,000,
based upon a lending formula (as defined) calculated on eligible
inventory. The interest rate per annum on this credit facility is
2% over the prime rate of Philadelphia National Bank. An unused
line fee of one quarter of one percent per annum and prescribed
early termination fees also exist under the line of credit.

Congress has a senior security interest in all of the Company s
assets and assets of its subsidiary and the stock of its
subsidiary. The line of credit facility provides Congress with
rights of acceleration upon the occurrence of certain customary
events of default including, among others, the event of
bankruptcy. The Company is also restricted from paying dividends,
retiring or repurchasing its common stock and entering into
additional indebtedness. As described above, an intercreditor
agreement exists between Congress, and the subordinated lenders,
I.E.C.P. and the Bank.

At closing, $200,000 was required to be placed in escrow in a
certificate of deposit as additional collateral for Congress.

PROPOSED PRIVATE PLACEMENT AND RELATED RESTRUCTURING OF CERTAIN
DEBT

As a result of continued losses and negative cash flows from
operations, on March 13, 1995 the Company announced that it would
seek to raise up to $4,200,000, prior to the payment of fees and
expenses, of new equity with the issuance of up to 12,000,000
shares of common stock pursuant to the terms of a Placement
Agreement (the Placement ) entered into between the Company and
Janssen-Meyers Associates, L.P. ( Janssen-Meyers ). The Placement
will be on a best efforts all or none basis for 7,500,000
shares and on a best efforts basis as to an additional
4,500,000 shares. It is anticipated that the price per common
share to be sold in the Placement will be between $.35 and $.38
(the market value of the Company's common stock on May 8, 1995 is
below such amounts). In connection with the Placement, the Company
will issue to Janssen-Meyers, seven-year warrants to acquire up to
2,750,000 shares of the Company s common stock at an exercise price
of 120% of the price that the shares are sold in the Placement.

The Company also entered into a letter agreement with Capital
Vision Group, Inc. ("CVG") pursuant to which the Company has agreed,
among other things, to retain CVG as its financial and business
advisor upon completion of the Placement. As compensation for
CVG's services, the Company agreed, contingent upon and following
the completion of the Placement, to pay CVG a cash fee equal to
$6,000 per month and to grant CVG seven-year warrants to purchase
5,000,000 shares of common stock at an exercise price of $.50 per share.

In conjunction with the approval of the Placement, and as a
condition of the Placement, the shareholders will also be
required to approve an Amendment to the Company s Restated
Certificate of Incorporation, which will increase the amount of
authorized common stock from 5,000,000 shares to 50,000,000
shares, reduce the par value of the common stock from $1.00 per
share to $.01 per share and increase the authorized preferred
stock from 100,000 shares to 2,500,000 shares.

As soon as practicable following the successful completion of the
Placement, and subject to shareholders approval, the Company
will effect a reverse stock split whereby each four shares of
common stock will be combined into one share of common stock. The
amended par value will remain at $.01 per share. The Company
shall have the option of paying cash in lieu of fractional shares
resulting from the reverse stock split or rounding up fractional
shares to the nearest whole number of shares.

Following the closing of the Placement, the Board of Directors
will fix the number of directors at not less than five and not
more than nine. In accordance with the letter agreement entered
into between the Company and CVG, the members of the Company s
Board of Directors must be reasonably satisfactory to CVG.

Proceeds from the proposed Placement, after related expenses,
will be used: (1) to reduce trade accounts payable, (2) to reduce
amounts outstanding under the revolving line of credit facility
and (3) as additional working capital, as deemed appropriate by
the Company (see Note 11 to the consolidated financial
statements).

ITEM 2. PROPERTIES

All of the premises which the Company occupies are leased. The
Company's facilities are adequate and suitable for its business
as such business is presently conducted. Information with
respect to the Company's leased premises is as follows:

APPROXIMATE
SELLING
SQUARE PRINCIPAL ANNUAL
LOCATION TERM FOOTAGE OPERATION RENT

600 Secaucus Road Leased Retail offices,
Secaucus, through warehouse
New Jersey 12/31/1999 27,000 facility
and outlet store $180,000

2 West 45th Street Leased
New York, through
New York 6/30/2005 7,500 Retail store $498,000

556 Route 17 North Leased
Paramus, through
New Jersey 6/30/2003 7,000 Retail store $238,000

485 Old Country Rd Leased
Westbury, through
New York 12/31/1996 3,000 Retail store $148,000

236 East Post Road Leased
White Plains, through
New York 2/28/1996 6,000 Retail store $63,000

Within ABC Leased
Carpet and Home through
888 Broadway and 9/4/1998 4,000 Retail store $150,000
19th Street minimum
New York, New York per annum

119 West 57th St. Leased
New York, New York through
10019 8/14/2004 3,300 Retail store $275,000

28 West 8th Street Month
New York, to $5,500
New York Month 750 Retail store per month

In addition, the Company had leased premises for the Boerner
Division offices in Roslyn Heights, New York. Lease commitments
remaining under this lease through March 31, 1999 approximated
$6,000,000. In connection with the sale of the Boerner Division,
the Company had entered into a sublease arrangement with Merkert
for this facility.

On July 8, 1992, the Company entered into termination agreements
with the landlord and Merkert relating to the original prime
lease and sublease as noted above. Pursuant to the agreement
with the landlord, the Company was released from all obligations
under the prime lease in exchange for consideration approximating
$885,000 (including $79,000 for legal, commission and
administrative fees which were paid in July 1992). Prepaid rent
and a security deposit aggregating $137,000 were used to
partially satisfy the above noted consideration. Approximately
$345,000 of the above mentioned consideration has been paid by
the Company through January 28, 1995. The remaining
consideration of $324,000 is to be paid over a period of time
annually as follows: $115,000 annually on January 1, 1996 and
January 1, 1997 and $94,000 on January 1, 1998. In conjunction
with the termination agreements and with the consent of the Bank,
all remaining amounts due from Merkert have been assigned to the
landlord. The Company's corporate offices, which were also
located in Roslyn Heights, New York have been relocated to
Secaucus, New Jersey, the headquarters of Harvey Electronics.

ITEM 3. LEGAL PROCEEDINGS

The Company or its subsidiaries are defendants in certain legal
actions which arose in the normal course of business, the outcome
of which, in the opinion of management, will not have a material
effect on the Company's financial position or operations.

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

There were no matters submitted for a vote of security holders
during the last quarter of the period covered by this report.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

The Company's Common Stock is traded on the American Stock
Exchange (ticker symbol HRA). The approximate number of record
holders of the Company's Common Stock at January 28, 1995 was
900.

The Company is currently not in compliance with the financial
guidelines for continued listing on the American Stock Exchange
and there can be no assurances that the listing will be continued
(see Note 11 to the consolidated financial statements regarding
the proposed Placement).

The following table indicates the quarterly high and low stock
prices for the last two fiscal years:

QUARTER 1995 QUARTER 1994
ENDED FIFTH LOW ENDED HIGH LOW

April 30, 1994 3/4 3/8 May 1, 1993 1 1/8 7/16
July 30, 1994 1/2 5/16 July 31, 1993 1 1/16 1/2
October 29, 1994 1/2 5/16 October 30, 1993 13/16 1/2
January 28, 1995 1/2 5/16 January 29, 1994 15/16 5/16

The Company has paid no dividends on its Common Stock for the last
two years. The Company's revolving line of credit facility, term
loans, subordinated debentures and convertible subordinated
debentures contain certain restrictions on the payment of
dividends.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks 52 Weeks 53 Weeks
Ended Ended Ended Ended Ended
January 28, January 29, January 30, February 1, February 2,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Selected data from
Statements
of Operations
Revenues $23,048,059 (1) $21,847,523 (1) $24,828,319 (1) $28,085,911 $25,619,441
Interest expense 468,450 469,566 (3) 546,668 (3) 350,884 426,680
(Loss) from continuing
operations (906,442) (1,733,110)(2) (298,349) (2,785,147)(4) (863,134) (4)(5)
(Loss) from discontinued
operations - - (259,390) (3,685,527) (894,144)
Net (loss) (906,442) (1,733,110) (557,739) (6,470,674) (1,757,278)
Net (loss) per share of
common stock (6):
(Loss) from continuing
operations (.29) (.55) (.11) (1.19) (.37)
(Loss) from discontinued
operations - - (.09) (1.58) (.39)
Net (loss) (.29) (.55) (.20) (2.77) (.76)

Selected balance sheet
data (8):
Current assets 4,683,150 6,731,746 5,335,098 9,074,745 8,145,950
Current liabilities 4,098,213 5,419,231 5,916,395 9,248,678 7,415,213
Working capital
(deficiency) 584,937 1,312,515 (518,297) (173,933) 730,737
Total assets 7,074,776 8,873,487 9,815,822 14,859,886 17,879,062
Long-term
liabilities
including
capital leases 4,194,724 3,765,975 2,483,036 4,410,439 2,739,406
Shareholders (deficit)
equity (7) (1,218,161) (311,719) 1,416,391 1,200,769 7,621,443

</TABLE>
See Note 1 to the accompanying consolidated financial statements as to the
Basis of Presentation.

NOTES TO CONSOLIDATED FINANCIAL DATA

(1) Revenues for fiscal 1995, 1994 and 1993 include
$135,059, $489,076 and $557,004, respectively, of
interest, consulting and other income relating to
the proceeds from the sale of the Boerner
Division. Additionally, revenues include a gain
on the sale of stock held for investment of
$110,733 in fiscal 1993.

(2) Includes a provision relating to the prepayment
discount ($320,266) of the amount due from Merkert
Enterprises in conjunction with the Company's
refinancing effort which was completed in fiscal
1994.

(3) Fiscal 1994 includes a $50,000 interest accrual
for a New York State tax audit assessment relating
to fiscal years 1988 through 1991. Fiscal 1993
includes interest paid to a judgment creditor of
approximately $60,000 and loan origination and
administrative fees of $61,000 paid to the
Company's bank.

(4) The loss from continuing operations includes a
provision for unfavorable outcome of lawsuit of
$2,138,076 and $400,000 for fiscal 1992 and 1991,
respectively. Such amounts include legal fees
associated with the defense of this lawsuit
aggregating $535,000 and $400,000 for fiscal 1992
and 1991, respectively.

(5) The loss from continuing operations for fiscal
1991 includes: net interest income of $367,297
relating to the completion of an examination by
the Internal Revenue Service and the write-off of
$137,711 of certain recoverable income taxes.

(6) The loss per share for all fiscal years presented
was computed on the weighted average number of
common shares outstanding; common equivalent
shares were not considered since their inclusion
would have been antidilutive.

(7) There were no cash dividends declared during the
five fiscal years ended January 28, 1995.

(8) Certain items in the fiscal 1991 consolidated
financial statements have been reclassified to
reflect the discontinued operations of the Boerner
Division.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Net (Loss)

The net loss from continuing operations for fiscal 1995 was
$906,442 ($.29 per share) as compared to a net loss of $1,733,110
($.55 per share) and $298,349 ($.11 per share) for fiscal 1994
and 1993, respectively. The net loss for fiscal 1994 includes a
provision of $320,266 ($.10 per share) relating to the prepayment
discount of the amount due from Merkert in conjunction with the
Company's successful refinancing, completed May 2, 1994. Fiscal
1994 also includes $210,000 ($.07 per share) of expenses relating
to additional nonrecurring advertising and various production
costs from the Company's advertising campaign. Additionally, the
loss for fiscal 1994 includes nonrecurring interest expense of
$50,000 ($.02 per share) relating to a New York State tax
assessment for fiscals 1988 through 1991. Fiscal 1993 includes a
gain on the sale of stock held for investment of $110,733 ($.04
per share).

The net loss for fiscal 1995, 1994 and 1993 includes interest,
consulting and other income aggregating $135,059 ($.04 per
share), $489,076 ($.15 per share) and $557,004 ($.20 per share),
respectively, relating to the sale of the Boerner Division.

Revenues

Total store sales for fiscal 1995 (inclusive of sales from the
Company's retail store opened in September 1993 and also from the
new retail store opened in November 1994) increased 6.9% from
fiscal 1994, which decreased 11.5% from fiscal 1993.

Comparable store sales for fiscal 1995 increased less than 1%
from fiscal 1994, which decreased 14% from fiscal 1993. The
increase in comparable store sales for fiscal 1995 is due
primarily to the Company's advertising campaign, merchandising
changes emphasizing home theater presentations and increased
custom home installation, offset by a decrease in lower margin
corporate sales. The decrease in comparable store sales for
fiscal 1994 as compared to fiscal 1993 is due primarily to
reduced corporate sales, extremely adverse weather conditions
experienced in the first and fourth quarters and from soft market
conditions experienced throughout the New York Metropolitan area.
This decrease was offset slightly by revenues from the Company's
first audio/video show and sale held in April 1993.

Costs and Expenses

Cost of sales for fiscal 1995 increased 5.8% from fiscal 1994 and
decreased 11.1% in fiscal 1994 from 1993. The increase in fiscal
1995 is due to increased sales as a result of the new store
openings as previously mentioned, offset by higher gross margins
experienced in fiscal 1995 from 1994. The decrease in fiscal
1994 from 1993 is principally from the aforementioned sales
decreases.

Gross profit margins in fiscal 1995 increased to 33.1% from 32.3%
in fiscal 1994 which in turn decreased slightly from 32.7% in
fiscal 1993. The gross profit margin increased for fiscal 1995
(despite certain new and extended promotional events which
reduced margins) primarily from further reductions in lower
margin corporate sales and to a lesser extent, continued
improvement in inventory shrinkage which has consistently been
much lower than industry average. Higher store margins in fiscal
1994 were offset by a reduction of purchase discounts primarily
from lower inventory purchases and reduced average inventories,
thus resulting in the overall decrease in gross margins from
fiscal 1993.

Consolidated selling, general and administrative expenses ("S,G&A
expenses") for fiscal 1995 decreased 1.6% from fiscal 1994
despite additional operating expenses relating to the new retail
stores as discussed above. S,G&A expenses remained consistent in
fiscal 1994 compared to fiscal 1993 despite increased advertising
costs as mentioned above, additional operating expenses relating
to the new retail store opened in September 1993 and costs
associated with the Company's first audio/video show and sale
held in April 1993. Excluding these additional expenses
(aggregating approximately $500,000 in fiscal 1994), comparable
S,G&A expenses decreased 5.9% in fiscal 1994 from fiscal 1993.
Comparable S,G&A expenses for fiscal 1995 also decreased 1.3%
from fiscal 1994. The decrease in S,G&A expenses is a result of
the Company's ongoing and effective expense reduction program
which was implemented by management in the second quarter of
fiscal 1994.

Consolidated interest expense for fiscal 1995 remained consistent
with fiscal 1994. Excluding interest of $50,000 in fiscal 1994
relating to the New York State tax audit assessment, interest
expense increased 11.7% for fiscal 1995. This increase was due
primarily from interest relating to the new term loans and
increased interest rates during fiscal 1995. Consolidated
interest expense for fiscal 1994 decreased 14.1 % as compared to
fiscal 1993. This is primarily the result of reduced bank
borrowings and non-recurring interest payments made to the
judgment creditor in fiscal 1993 offset by additional interest on
the term loan which financed the opening of the new retail store
in September 1993, and interest expense relating to the New York
State tax audit assessment, as discussed above.

Liquidity and Capital Resources

The Company's ratio of current assets to current liabilities was
1.14 at January 28, 1995 as compared to 1.24 at January 29, 1994
and .90 at January 30, 1993. The decrease in the current ratio
for fiscal 1995 is primarily due to the use of cash to fund the
Company's net loss, offset by the classification to long-term
debt of the entire amount outstanding under the Congress
revolving line of credit facility at January 28, 1995. The
increase in the current ratio for fiscal 1994 is primarily the
result of the successful refinancing which was concluded May 2,
1994.

The Company successfully completed a refinancing on May 2, 1994.
The refinancing included the discounted prepayment of a
significant portion ($2,150,000) of the remaining amount due from
Merkert Enterprises. Proceeds of the prepayment aggregating
$2,100,000, were used to substantially reduce the current
obligation due to the Company's predecessor bank, National
Westminster Bank USA (from $2,600,000 to $500,000). The
remaining obligation with this bank was refinanced into a two
year term loan ($455,000 outstanding at January 28, 1995).

The Company simultaneously obtained new financing under a three
year revolving line of credit facility with Congress Financial
Corporation and may now borrow up to $3,000,000 based on a
lending formula (as defined) calculated on eligible inventory.
The amount outstanding under the revolving line of credit
facility ($1,341,020 at January 28, 1995) is classified as long-
term debt. Effective April 5, 1995 Congress has agreed to
provide additional availability of $200,000 to the Company
through the revolving line of credit facility. This additional
amount will be available for working capital needs until the
proposed Placement (see below) is completed.

On October 30, 1994 the Company opened a new retail store located
on prestigious 57th Street in Manhattan. Accordingly, the
Company entered into a ten year lease for this new store and also
entered into a Term Loan with I.E.C.P. to finance $200,000 for
necessary capital improvements, a security deposit and inventory.
The Term Loan bears interest at 13% per annum, and requires
payment of $200,000 on August 30, 1999. I.E.C.P. also received
Warrants for the right to immediately purchase 150,000 shares of
the Company's common stock at $1.00 per share. The Term Loan
may be redeemed in its entirety at the election of the Company at
any time after February 1, 1995, at a prescribed premium. The
remainder of the financing necessary for the opening of the new
store (approximately $300,000) was provided by borrowings from
the Company's revolving line of credit facility with Congress.

In July 1994, the Company requested an extension of the maturity
on its remaining ($398,000) 10% Subordinated Debentures
("Debentures"), originally due July 1, 1995. Holders of $276,155
of these Debentures consented to a two year extension of maturity
(due July 1, 1997) with an increase in the interest rate to 11%
per annum, effective January 1, 1995. Holders of $121,845 of the
remaining Debentures agreed to extend the maturity for 10 years
through July 1, 2005 with the interest rate remaining at 10%.
Additionally, these Debenture holders also forgave $6,845 of the
outstanding principal balance, leaving $115,000 to be repaid in
ten equal annual installments of $11,500 beginning July 1, 1996.
As a result, $391,155 of the Debentures remain outstanding and
are classified as long-term debt as of January 28, 1995.

The loss of liquidity has caused the Company to delay payments to
many of its suppliers of inventory. As a result, the Company is
currently experiencing some difficulty in stocking certain inventory
at desired levels, resulting in an adverse effect on current sales.

As a result of continued losses and negative cash flows from
operations, on March 13, 1995 the Company announced that it would
seek to raise up to $4,200,000, prior to the payment of fees and
expenses, of new equity with the issuance of up to 12,000,000
shares of common stock pursuant to the terms of a Placement
Agreement (the "Placement") entered into between the Company and
Janssen-Meyers Associates, L.P. ("Janssen-Meyers"). The
Placement will be on a "best efforts all or none basis" for
7,500,000 shares and on a "best efforts basis" as to an
additional 4,500,000 shares. It is anticipated that the price
per share sold in the Placement will be between $.35 and $.38
(the market value of the Company's common stock on May 8, 1995 is
below such amounts). In connection with the Placement, the Company
will issue to Janssen-Meyers, seven-year warrants to acquire up to
2,750,000 shares of the Company's common stock at an exercise price
of 120% of the price that shares are sold in the Placement.

The Company believes that the net cash provided by this proposed
placement, assuming the minimum 7,500,000 shares are sold, in
conjunction with the Company's efforts to further reduce
expenses, (including the expected reduction in interest expense
from the proposed conversion of certain debentures), lower
inventory levels and increase its sales base through
merchandising and marketing changes, will be adequate to meet its
working capital needs for fiscal 1996.

There can be no assurance that this proposed Placement will be
completed. Unless the above Placement or other appropriate
equity offering is consummated, the Company may be forced to
informally restructure its obligations with its creditors or
formally reorganize or liquidate under the United States
Bankruptcy Code.

During the period, the Company was not significantly impacted by
the effects of inflation.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The response to the Item is submitted in the financial statements
set forth below:

Annual Report on Form 10 K
Item 8, Item 14(a) (1) and (2), (c) and (d)

List of Financial Statements
and
Financial Statement Schedules

Financial Statements
Certain Exhibits
Financial Statement Schedules
Fiscal year ended January 28, 1995

The Harvey Group Inc. and Subsidiaries
Secaucus, New Jersey

FORM 10 K ITEM 14(a)(1) AND (2)

THE HARVEY GROUP INC. AND SUBSIDIARIES

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

The following consolidated financial statements of The Harvey
Group Inc. and subsidiaries are included in Item 8:

Consolidated balance sheets January 28, 1995 and January 29,
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II 13

Consolidated statements of operations Fiscal years
ended January 28, 1995, January 29,1994 and January 30,
1993 . . . . . . . . . . . . . . . . . . . . . . . . . II 15

Consolidated statements of shareholders (deficit) equity
Fiscal years ended January 28, 1995, January 29, 1994
and January 30, 1993 . . . . . . . . . . . . . . . . . II 16

Consolidated statements of cash flows Fiscal years
ended January 28, 1995, January 29, 1994 and
January 30, 1993 . . . . . . . . . . . . . . . . . . . II 17

Notes to consolidated financial statements January 28,
1995 . . . . . . . . . . . . . . . . . . . . . . . . . II 19

The following consolidated financial statement schedule of The
Harvey Group Inc. and subsidiaries are included in Item 14(d):

Schedule II Valuation and qualifying accounts . . . . . . II 34

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.

Report of Independent Auditors

Shareholders and Board of Directors
The Harvey Group Inc.

We have audited the accompanying consolidated balance sheets of
The Harvey Group Inc. as of January 28, 1995 and January 29,
1994, and the related consolidated statements of operations,
shareholders (deficit) equity, and cash flows for each of the
three fiscal years in the period ended January 28, 1995. Our
audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule
are the responsibility of the Company s management. Our
responsibility is to express an opinion on these financial
statements and schedules based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of The Harvey Group Inc. at January 28, 1995
and January 29, 1994, and the consolidated results of its
operations and its cash flows for each of the three fiscal years
in the period ended January 28, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As more fully described in Note 1, the Company has
incurred recurring losses and negative cash flows from operations
and anticipates that negative cash flows from operations will
continue. These conditions raise substantial doubt about the
Company s ability to continue as a going concern. Management s
plans in regard to these matters are described in Notes 1 and 11.
The consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.

ERNST & YOUNG LLP

March 24, 1995, except for Note 4,
as to which the date is April 6, 1995

THE HARVEY GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JANUARY 28 JANUARY 29
1995 1994

ASSETS (Notes 1 and 4)
Current assets:
Cash and cash equivalents $75,243 $ 226,119
Trade receivables, less allowance of
$25,000-1995 and $12,500 -
1994 (Note 1) 608,295 523,172
Inventories 3,694,415 3,546,004
Amount due from Merkert Enterprises,
including interest receivable of
$1,075-1995 and $245,922-
1994 (Notes 2 and 4) 88,175 2,199,591
Amount due from AIMS Corporation,
including interest receivable of
$981 - 1994 - 39,533
Prepaid expenses and other current
assets 217,022 197,327
Total current assets 4,683,150 6,731,746

Property, plant, and equipment, at cost:
Leasehold improvements 1,941,130 1,858,020
Furniture, fixtures and equipment 1,926,845 1,743,038
3,867,975 3,601,058

Less accumulated depreciation and
amortization (2,697,864) (2,365,465)
1,170,111 1,235,593
Certificate of deposit, including
interest receivable of
$7,130 (Note 4) 207,130 -
Equipment under capital leases, less
accumulated depreciation of
$272,065-1995 and $345,409-1994
(Note 8) 122,662 99,635
Amount due from Merkert Enterprises
(Notes 2 and 4) 68,329 155,428
Other, less accumulated amortization of
$574,095-1995 and $412,614-1994 823,394 651,085
Total assets $7,074,776 $8,873,487

See notes to consolidated financial statements.

THE HARVEY GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

JANUARY 28 JANUARY 29
1995 1994

LIABILITIES AND SHAREHOLDERS'
(DEFICIT) (Note 1)
Current liabilities:
Trade accounts payable $2,536,288 $2,511,303
Accrued expenses and other current
liabilities (Note 9) 811,455 847,234
Note payable to bank (Notes 2 and 4) - 1,450,000
Income taxes 10,471 34,342
Accrued costs related to discontinued
operations (Note 2) 136,193 138,630
Current portion of long-term
liabilities (Notes 4 and 9) 530,028 361,517
Current portion of capital lease
obligations (Note 8) 73,778 76,205
Total current liabilities 4,098,213 5,419,231

Long-term liabilities:
Long-term debt (Notes 2 and 4) 3,313,425 2,744,370
Accrued costs related to discontinued
operations (Note 2) 257,033 398,227
Other liabilities (Note 9) 580,946 582,894
4,151,404 3,725,491

Capital lease obligations (Note 8) 43,320 40,484

Shareholders' (deficit) (Notes 4, 5 and 11):
Preferred stock, par value $20 per share;
authorized 100,000 shares; none issued
Common stock, par value $1 per share;
authorized 5,000,000 shares; issued
3,498,968-1995 and 1994 3,498,968 3,498,968
Capital in excess of par 5,899,010 5,899,010
Retained (deficit) (9,750,538) (8,844,096)
(352,560) 553,882
Less treasury stock, at cost (334,081
shares - 1995 and 1994) (865,601) (865,601)
Total shareholders' (deficit) (1,218,161) (311,719)
Commitments and contingencies (Note 8)

Total liabilities and shareholders'
(deficit) $7,074,776 $8,873,487

See notes to consolidated financial statements.

THE HARVEY GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 28 JANUARY 29 JANUARY 30
1995 1994 1993
REVENUES
Net sales $22,814,279 $21,348,066 $24,136,172
Interest and other income
(Note 9) 233,780 499,457 692,147
23,048,059 21,847,523 24,828,319
COST AND EXPENSES
Cost of sales 15,274,991 14,442,169 16,239,401
Selling, general and
administrative expenses 8,211,060 8,348,632 8,340,599
Interest expense (Notes 2 and 4) 468,450 469,566 546,668
Provision for prepayment discount
of Merkert receivable
(Notes 2 and 4) - 320,266 -
23,954,501 23,580,633 25,126,668
(Loss) from continuing operations
before income taxes (906,442) (1,733,110) (298,349)
Income taxes (Note 6) - - -
(Loss) from continuing operations (906,442) (1,733,110) (298,349)

(Loss) on disposal of discontinued
operations (Note 2) - - (259,390)
Net (loss) $ (906,442) $(1,733,110) $(557,739)

Net (loss) per common and common
equivalent share:
(Loss) from continuing operations $(.29) $(.55) $(.11)
(Loss) from discontinued operations - - (.09)
Net (loss) $(.29) $(.55) $(.20)
Weighted average number of common
shares and common equivalent shares
outstanding during the year 3,164,887 3,163,637 2,773,207

See notes to consolidated financial statements.

THE HARVEY GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY

<TABLE>
<CAPTION>
Capital Total
Common Stock in Excess Retained Treasury Shareholders'
Shares Amount of Par (Deficit) Stock (Deficit) Equity
<S> <C> <C> <C> <C> <C> <C>

Balance at February 1,
1992 2,725,607 $2,725,607 $5,906,960 $(6,553,247) $(878,551) $1,200,769
Net (loss) for the year (557,739) (557,739)
Issuance of 468,750 shares
of common stock in
connection with the Private
Placement (Note 3) 468,750 468,750 468,750
Exchange of $304,611 principal
amount of 10% subordinated
debentrues to 304,611
shares of common stock
(Note 3) 304,611 304,611 304,611
Balance at Jauary 30, 1993 3,498,968 3,498,968 5,906,960 (7,110,986) (878,551) 1,416,391
Net (loss) for the year (1,733,110) (1,733,110)
Issuance of 5,000 shares
of common stock ($1.00
par value) held in treasury
at an average cost of $2.59 (7,950) 12,950 5,000
Balance at January 29, 1994 3,498,968 3,498,968 5,899,010 (8,844,096) (865,601) (311,719)
Net (loss) for the year (906,442) (906,442)
Balance at January 28, 1995 3,498,968 $3,498,968 $5,899,010 $(9,750,538) $(865,601) $ (1,218,161)

</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THE HARVEY GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 28 JANUARY 29 JANUARY 30
1995 1994 1993
OPERATING ACTIVITIES
Net (loss) $ (906,442) $(1,733,110) $ (557,739)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Provision for prepayment discount
of Merkert receivable - 320,266 -
Loss on disposal of discontinued operations - - 217,798
Depreciation and amortization 604,697 511,358 473,759
Loss (gain) on sale/disposal of property,
plant equipment and other assets - 782 (124,907)
Provision for losses on accounts
receivable 12,500 2,500 -
Increase in cash surrender value of
officers' life insurance - (35,788) (25,696)
Provision for deferred compensation plan 12,918 11,299 10,105
Payments on covenant not to compete,
consulting and deferred compensation
agreements (94,175) (194,869) (223,699)
Net payments relating to discontinued
operations (132,508) (289,002) (1,446,243)
Payments of restructured legal costs
(79,687) (142,000) (82,000)
Straight-line impact of rent escalations 64,298 17,714 27,982
Reversal of sales tax and other
liabilities (50,343) - -
Payments to judgment creditor - - (1,963,557)
Changes in operating assets and liabilities:
Accounts receivable (97,623) (35,433) 2,081,789
Inventories (132,441) 19,288 479,964
Accrued interest receivable (7,224) 55,573 (248,383)
Prepaid expenses and other current
assets 40,305 34,457 (17,268)
Accounts payable 24,985 904,771 (44,593)
Accrued expenses and other current
liabilities and income taxes payable (59,650) (32,980) (1,058,711)
Net cash (used in) operating activities (800,390) (585,174) (2,501,399)

The Harvey Group Inc. and Subsidiaries

Consolidated Statements of Cash Flows (continued)

52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 28 JANUARY 29 JANUARY 30
1995 1994 1993

INVESTING ACTIVITIES
Proceeds from Merkert Enterprises $ 2,199,590 689,611 1,954,669
Purchase of certificate of deposit (200,000) - -
Proceeds from Aims Corporation 38,552 57,052 -
Purchases of property, plant and
equipment (271,135) (259,710) (174,320)
Proceeds from sale of property,
plant, equipment and other assets - 5,163 87,802
Purchase of other assets (250,643) (117,162) (18,564)
Net cash provided by investing
activities 1,516,364 374,954 1,849,587

FINANCING ACTIVITIES
Proceeds from Revolving line of
credit facility 19,783,964 - -
Repayments of Revolving line of
credit facility (18,442,944) - -
Debt payments forgiven by creditors (20,812) - -
Proceeds from sale of 10% convertible
subordinated debentures - - 781,250
Proceeds from borrowings of cash
surrender value of
officer's life insurance - - 100,000
Proceeds from note payable to bank - 800,000 661,000
Proceeds from term loans 200,000 400,000 -
Principal payments on long-term debt (133,316) (268,110) (191,882)
Principal payments on note payable
to bank and term loan (2,145,000) (500,000) (1,486,000)
Reclassification of accrued expenses
to long-term debt 10,000 71,000 96,000
Principal payments on capital lease
obligations (118,742) (108,597) (72,659)
Proceeds from sale of common stock - - 468,750
Net cash (used in) provided by
financing activities (866,850) 394,293 356,459
(Decrease) increase in cash and cash
equivalents (150,876) 184,073 (295,353)
Cash and cash equivalents at
beginning of year 226,119 42,046 337,399
Cash and cash equivalents at end
of year $ 75,243 $ 226,119 $ 42,046

See notes to consolidated financial statements.

THE HARVEY GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 28 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

BASIS OF PRESENTATION

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. The Company has incurred recurring losses and negative
cash flows from operations for each of the three fiscal years in
the period ending January 28, 1995, and anticipates that negative
cash flows from operations will continue. These conditions raise
substantial doubt about the Company s ability to continue as a
going concern. Management s plans in regard to these matters
principally include raising additional equity through a private
placement, which will require converting or extending the
maturity of certain Debentures (see Note 11). Additionally, the
Company will look to increase its sales through merchandising and
marketing changes and further reduce expenses and lower inventory
levels. If the Company is unable to accomplish these objectives
or otherwise generate sufficient levels of cash flows from
operations and/or alternative financing sources, as necessary,
the Company may not be able to continue as a going concern and
may be forced to informally restructure its obligations with its
creditors or formally reorganize or liquidate under the United
States Bankruptcy Code. The financial statements do not include
any adjustments that may result from the possible inability of
the Company to continue as a going concern.

DESCRIPTION OF BUSINESS

Harvey Electronics, the operating entity of The Harvey Group Inc.
and subsidiaries (the "Company"), is a specialty retailer of high
quality audio/video consumer electronics and home theater
products with eight stores in the Metropolitan New York area.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly owned. All
significant intercompany accounts and transactions have been
eliminated in consolidation.

INVENTORIES

Inventories are stated at the lower of cost (average cost method,
which approximates the first in, first out method) or market.

DEPRECIATION AND AMORTIZATION

Depreciation of property, plant and equipment, including
equipment acquired under capital leases, is provided for by the
straight line method over the estimated useful lives of the
related equipment. Leasehold improvements are amortized over the
lease term or estimated useful life of the improvements,
whichever is shorter.

LOSS PER SHARE

The loss per common share for fiscal years 1995, 1994 and 1993
was computed on the weighted average number of common shares
outstanding; common equivalent shares were not considered since
their inclusion would have been antidilutive. Per share data for
all years presented, on a fully diluted basis, is the same as
amounts shown.

STATEMENT OF CASH FLOWS

The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents.

Total interest paid during fiscal 1995, 1994 and 1993 was
$486,000, $430,000 and $563,000, respectively. Total income taxes
paid during fiscal 1995, 1994 and 1993 was $29,000, $3,000, and
$18,000 respectively.

CONCENTRATION OF CREDIT RISK

The Company s operations consist of the retail sale, service and
custom installation of advanced consumer electronic equipment,
specifically home audio and custom video equipment. The Company
performs ongoing credit evaluations of its customers financial
condition and payment history but does not require collateral.
Generally, accounts receivable are due within 30 days and credit
losses have historically been minimal.

2. DISCONTINUED OPERATIONS AND PREPAYMENT OF AMOUNT DUE FROM
MERKERT ENTERPRISES

On March 31, 1992, the Company completed the sale of certain
assets and the business of its food brokerage division, The
Boerner Company ("Boerner Division"), to Merkert Enterprises,
Inc., a Massachusetts corporation ("Merkert"). Pursuant to the
terms of the Asset Purchase Agreement (the Agreement ), the
Company sold certain tangible and intangible assets including the
business of the Boerner Division, agreed not to compete with
Merkert in the food brokerage business and also agreed to provide
certain consulting services to Merkert.

Pursuant to the Agreement, the purchase price was unsecured and
the Company was to receive an aggregate consideration, payable by
Merkert over five and one quarter years, equal to approximately
$7,237,000 (which amount includes interest payments, at 12.5% per
annum, and payment of $1,037,000 for substantially all of the
fixed assets of the Boerner Division, which amount was received
by the Company on April 1, 1992). However, the purchase price was
subject to adjustment for, among other things, modification,
resignation or termination by existing principals of the Boerner
Division (including the failure of principals to appoint Merkert
as food broker) during the one year period following the closing
of the transaction. During this period, ending March 31, 1993,
the Boerner Division experienced the resignation of certain
principals decreasing the aggregate purchase price to be received
by $610,951. As a result, the present value of the aforementioned
purchase price was reduced, and $238,955 was charged to loss on
Disposal of Discontinued Operations in fiscal 1993.

In conjunction with the refinancing (see Note 4) completed May 2,
1994, the Company agreed to the discounting and prepayment of
certain remaining scheduled payments due from Merkert. At
closing, the Company received $2,150,000 from Merkert of which
$2,100,000 was used to substantially reduce the outstanding
amount (from $2,600,000 to $500,000) due to National Westminster
Bank USA (the "Bank"). As a result of this agreement, in fiscal
1994 the Company recorded a provision to continuing operations
relating to the resulting discount of $320,266.

In accordance with the prepayment agreement, the remaining
installments to be received from Merkert are as follows:
Installment
Fiscal Year Date Payment Interest Principal

1996 1/1/96 $100,000 $12,901 $87,099
1997 1/1/97 74,000 5,670 68,330
Totals $174,000 $18,571 $155,429

Remaining installment payments to be received will be used to pay
outstanding obligations under a lease termination agreement (see
Note 8).

Accrued costs relating to discontinued operations at January 28,
1995 and January 29, 1994 aggregate $393,226 and $536,856,
respectively. The long term portions of $257,033 and $398,227 for
fiscal 1995 and 1994, respectively, are comprised primarily of
lease commitments (see Note 8) and legal fees.

3. COMPLETION OF PRIVATE PLACEMENT AND EXCHANGE AGREEMENT

In August 1992, the Company completed a private placement
aggregating $1,250,000, comprised of 468,750 shares of common
stock, and $781,250 aggregate principal amount of 10% convertible
subordinated Debentures ("Convertible Debentures"). The shares of
common stock were sold at a price of $1.00 per share, (which
exceeded market value at the time of sale) (see Note 4).

On September 1,1992, the Company used the proceeds noted above
and other available cash to satisfy the remaining obligations to
a judgment creditor. Investors in the private placement included
certain members of the Company s Board of Directors and certain
members of management.

On August 6, 1992, the Company also issued an additional 304,611
shares of common stock pursuant to an Exchange Agreement (the
"Exchange Agreement") dated as of June 8, 1992, between the
Company and Windcrest Partners ("Windcrest"). Pursuant to the
Exchange Agreement, Windcrest acquired such shares of common
stock, at $1.00 par value in exchange for $304,611 principal
amount of the Company s existing 10% subordinated Debentures due
July 1, 1993 held by Windcrest (see Note 4). Windcrest is the
largest shareholder of the Company and a partner thereof is a
member of the Company s Board of Directors.

4. REFINANCING OF NOTE PAYABLE TO BANK, NEW REVOLVING LINE OF
CREDIT FACILITY AND LONG TERM DEBT

REFINANCING OF NOTE PAYABLE TO BANK

On May 2, 1994 the Company completed the refinancing which
included the prepayment and discounting of the receivable due
from Merkert (see Note 2). At closing, the Company received
$2,150,000 from Merkert of which $2,100,000 was used to
substantially reduce the amount due to the Bank (from $2,600,000
to $500,000). The remaining $500,000 obligation was converted to
a two year term loan bearing interest at the Bank's prime rate
plus 5% per annum and the existing credit facility was cancelled.

The Bank and InterEquity Capital Partners L.P. ("I.E.C.P."), an
entity which in 1995 and 1994 provided term loans to the Company
(see below), have entered into an intercreditor agreement whereby
both will share equally in a subordinate second position to the
Company s new lender, Congress Financial Corporation
("Congress"). The term loan with the Bank also provides for
rights of acceleration upon the occurrence of certain customary
events of default and includes restrictive covenants similar to
those existing with the term loan from I.E.C.P.

NEW REVOLVING LINE OF CREDIT FACILITY

Pursuant to the refinancing effort, the Company entered into a
three year revolving line of credit facility with Congress, dated
May 2, 1994 whereby the Company may borrow up to $3,000,000,
based upon a lending formula (as defined), calculated on eligible
inventory. The interest rate per annum on this revolving line of
credit facility is 2% over the prime rate of Philadelphia
National Bank. An unused line fee of one quarter of one percent
per annum and prescribed early termination fees also exist under
the line of credit. At closing, $200,000 was required to be
placed in escrow in a certificate of deposit as additional
collateral for Congress.

Congress has a senior security interest in all of the Company s
assets and assets of a subsidiary and the stock of such
subsidiary. The line of credit facility provides Congress with
rights of acceleration upon the occurrence of certain customary
events of default including, among others, the event of
bankruptcy. The Company is also restricted from paying dividends,
retiring or repurchasing its common stock and entering into
additional indebtedness. As discussed above, an intercreditor
agreement exists between Congress, and the subordinated lenders,
I.E.C.P. and the Bank.

Effective April 6, 1995, Congress has agreed to provide
additional availability of $200,000 to the Company through the
revolving line of credit facility. This additional amount will be
available for working capital needs until the proposed Placement
(see Note 11) is completed.

LONG TERM DEBT
January 28 January 29
1995 1994

Long-term portion of Congress revolving $1,341,020 $700,000
line of credit facility
(a) Term loan due to National
Westminster Bank USA 455,000 500,000
(b) 10% Subordinated debentures 391,155 398,000
(c) 10% Convertible subordinated debentures 781,250 781,250

(d) Notes payable Audio Exchange - 50,000
(e) Notes payable truck financing 15,120 44,001
(f) 13% Convertible term loan -
InterEquity Capital Partners, L.P. 400,000 400,000
(g) 13% Term loan-InterEquity
Capital Partners, L.P. 200,000 -
3,583,545 2,873,251
Less current portion 270,120 128,881
$3,313,425 $2,744,370

(a) Payable at $5,000 January 31, 1995, $100,000 February 1,
1995, $12,500 in monthly installments from February 1995 to
January 1996 and $200,000 due February 1, 1996.

(b) The 10% subordinated debentures ("Debentures") (which are
principally due to shareholders of the Company), under which
interest is payable semiannually on January 1 and July 1,
are subordinate to all senior indebtedness (as defined
therein) of the Company and are redeemable at face value at
the option of the Company at any time prior to maturity.

In July 1994, the Company requested extension of the
maturity on its remaining ($398,000) 10% Debentures, due
July 1, 1995. Holders of $276,155 of these Debentures
consented to a two year extension of maturity (through July
1, 1997) with an increase in the interest rate to 11% per
annum, effective January 1, 1995. Holders of $121,845 of the
remaining Debentures agreed to extend the maturity for 10
years through July 1, 2005 with the interest rate remaining
at 10%.

Additionally, these Debentures holders also forgave $6,845
of the outstanding principal balance, leaving $115,000 to be
repaid in ten equal installments of $11,500 beginning July
1, 1996. As a result, $391,155 of the Debentures remain
outstanding and are classified as long-term debt as of
January 28, 1995.

The Company is required to make annual payments to the
Debenture holders in amounts equal to 20% of the Company s
net income in excess of $500,000, up to a maximum annual
payment of $150,000. The Debentures contain certain
restrictions, as defined, on the payment of dividends. (See
Note 11 regarding proposed conversion or extension of
$276,155 of such Debentures).

(c) In connection with the completed private placement (see Note
3), the Company issued $781,250 aggregate principal amount
of 10% Convertible Debentures. The Convertible Debentures
are convertible into shares of common stock after July 1,
1993 at a conversion price of $1.15 per share and may be
redeemed in their entirety at the election of the Company at
any time after July 1, 1994 at a prescribed premium. The
Convertible Debentures mature July 1, 1997 and are
subordinate to all senior indebtedness (as defined therein)
and contain certain restrictions, as defined, on the payment
of dividends. Interest is payable semi annually on January
1, and July 1 at 10% per annum on the outstanding principal
balance. Convertible Debentures in the aggregate amount of
$265,625 are held by members of the Company s Board of
Directors and certain members of management. The Company is
required to make a sinking fund payment of $390,625 on July
1, 1996. (See Note 11 regarding proposed conversion or
extension of these Convertible Debentures).

(d) The 10% notes to Audio Exchange were paid in full in fiscal
1995.

(e) The notes payable relate to the financing of two trucks
($10,943) and a van ($4,177), with a cost basis aggregating
approximately $82,000. Payments for thirty six months
approximate $2,703 per month and include interest at rates
of 13% and 6%, respectively.

(f) On August 31, 1993, in connection with the opening of a
retail store in fiscal 1994 (see Note 10), the Company
entered into a Store Financing and Term Loan Agreement
("Term Loan") with I.E.C.P. to finance $400,000 for all
necessary leasehold improvements, equipment and inventory.
The Term Loan bears interest at 13% per annum, and requires
a payment of $400,000 on August 31, 1998. The Term Loan is
also convertible into shares of common stock at a conversion
price of $1.15 per share and may be redeemed in its entirety
at the election of the Company at a prescribed premium. The
Term Loan, which is subordinate to Congress (see Note 3),
provides I.E.C.P. with rights of acceleration upon the
occurrence of certain customary events of default including,
among others, payment defaults and the event of bankruptcy.
The Company is also restricted from paying dividends,
retiring or repurchasing its common stock and entering into
additional indebtedness.

(g) On August 30, 1994, in connection with the opening of a new
retail store in fiscal 1995 (see Note 10), the Company
entered into a second Term Loan with I.E.C.P. for $200,000.
The loan bears interest at 13% per annum, and requires a
balloon principal payment of $200,000 on August 30, 1999.
I.E.C.P. also received Warrants for the right to immediately
purchase 150,000 shares of the Company s common stock at
$1.00 per share. The loan may be redeemed in its entirety at
the election of the Company at any time after February 1,
1995, at a prescribed premium. The loan, which is
subordinate to Congress (see Note 3), contains the same
rights and restrictions as the term loan set forth in (f)
above.

The aggregate maturities of long term debt are:

1996 $270,120

1997 602,125

1998 2,019,300

1999 411,500

2000 211,500

Thereafter 69,000
$3,583,545

5. CAPITAL STOCK

COMMON STOCK

During 1988, the shareholders of the Company approved the 1988
Stock Option Plan which provides for the grant of incentive and
nonqualified stock options to certain directors, officers and key
employees. The Company has reserved 200,000 shares for issuance
under this plan. The stock options are exercisable at prices not
less than the fair market value of the Company s common stock on
the date of grant. All options must be exercised within five
years from the date of grant.

At January 28, 1995 and January 29, 1994 the Company had reserved
200,000 and 215,000 shares of common stock, respectively, for
issuance in connection with stock options.

Transactions during the three fiscal years ended January 28, 1995
were as follows:

Shares Shares Under Option
Available Option Price Number
for Granting Per Share of Shares

Balance at February 1, 1992 32,975 188,500
Cancelled 167,025 $1.125 to $1.375 (167,025)
Granted (178,000) $1.00 178,000
Expired - $1.125 to $1.375 (6,475)
Balance at January 30, 1993 22,000 193,000
Cancelled 10,000 $1.00 (10,000)
Granted - -
Expired - -
Balance at January 29, 1994 32,000 183,000
Cancelled 5,000 $1.00 (5,000)
Granted - -
Expired - $2.125 (15,000)
Balance at January 28, 1995 37,000 163,000

Of the options outstanding at January 28, 1995, 163,000 options
are exercisable in three equal annual installments commencing one
year from the date of grant. At January 28, 1995 and January 29,
1994, options for 108,667 and 71,000 shares, respectively, were
exercisable.

6. INCOME TAXES

At January 28, 1995, the Company has available net operating loss
carryforwards of approximately $9,000,000 which expire in various
years through fiscal 2010. Alternative minimum taxes of
approximately $53,000 can be carried forward indefinitely and may
be utilized to reduce the regular tax liability in a future year.
The Company also has available investment tax credits of
approximately $90,000 expiring in various years through fiscal
2001, and a capital loss carryover of approximately $1,458,000
expiring in fiscal 1998. Under the Company s proposed private
placement (see Note 11) the net operating loss carryforward and
other tax attributes would be severely restricted.

At January 28, 1995, deferred tax assets approximating $4,400,000
arising primarily from the future availability of the above tax
attributes have been offset in full by a valuation allowance.

The reconciliation of the difference between income tax (benefit)
and the amount computed by applying the statutory Federal income
tax rate of 34% to income from continuing operations is as
follows:

1995 1994 1993
Income tax (benefit at statuory
rate on (loss) before income taxes $(285,940) $(572,257) $(189,631)

Benefit not recoreded due to net
carryforward Position 285,940 572,257 189,631

Income tax expense $ - $ - $ -

7. PENSION AND PROFIT SHARING PLAN

The Harvey Group Inc. Savings and Investment Plan (the "Plan")
includes profit sharing, defined contribution and 401(k)
provisions and is available to all eligible employees of the
Company. Contributions (primarily based on salaries of eligible
employees and matching of employee contributions under the 401(k)
provisions) to the Plan for fiscal years 1995, 1994 and 1993
approximated $25,000, $47,000 and $50,000, respectively.
Effective January 1, 1995 the Company s Board of Directors
temporarily elected to eliminate the employer 401(k) match on
employee contributions.

8. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

The Company s financial statements reflect the accounting for
equipment leases as capital leases recording the asset and
liability for the lease obligation. Capital lease acquisitions
amounted to $133,000 in fiscal 1995. Future minimum rental
commitments, by year and in the aggregate, under the capital
lease and noncancelable operating leases with initial or
remaining terms of one year or more consisted of the following at
January 28, 1995:

Operating Capital
Leases Leases

Fiscal 1996 $1,433,000 $84,000
Fiscal 1997 1,403,000 24,000
Fiscal 1998 1,203,000 24,000
Fiscal 1999 1,212,000
Fiscal 2000 1,221,000
Thereafter 5,003,000
Total minimum lease payments $11,475,000 132,000
Less amount representing interest 15,000
Present value of net minimum
lease payments 117,000
Less current portion 74,000
$43,000

The Company s minimum annual commitment of $150,000 through
August 31, 1998 relating to the retail store opened in fiscal
1994 and located within ABC Carpet and Home has not been
presented in the above total minimum lease payments as this lease
is contingent on the attainment of specified sales levels (see
Note 10).

On July 8, 1992, the Company entered into termination agreements
with the landlord of its previous headquarters located in Roslyn
Heights, and Merkert, relating to the original prime lease and
sublease agreements. Pursuant to the agreement with the landlord,
the Company was released from all obligations under the prime
lease for consideration approximating $885,000 (including $79,000
for legal, commission and administrative fees which were paid in
July 1992). Prepaid rent and a security deposit aggregating
$137,000 were used to partially satisfy the above noted
consideration. Approximately $345,000 has been paid by the
Company through January 28, 1995. The remaining consideration of
$324,000 is to be paid as follows: $115,000 annually on January
1, 1996 and 1997 and $94,000 on January 1, 1998. In conjunction
with the termination agreements and with the consent of the Bank,
the Company assigned the remaining amounts to be received from
Merkert to the landlord (see Note 2). Remaining amounts due to
the landlord under the settlement are included in the balance
sheet caption "Accrued Costs Related to Discontinued Operations".

Total rental expense for operating leases was $1,180,000,
$1,038,000, and $999,000 in fiscals 1995, 1994 and 1993,
respectively. Certain leases provide for the payment of
insurance, maintenance charges and taxes and contain renewal
options.

CONTINGENCIES

The Company had available standby letters of credit outstanding
at January 28, 1995, aggregating $185,000.

9. OTHER INFORMATION

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Included in accrued expenses and other current liabilities at
January 28, 1995 and January 29, 1994 were the following:

1995 1994
Salaries, severance, vacation and
incentives $167,349 $189,963
Accrued professional fees 35,575 54,631
401(k)/defined contribution and employee
benefits 12,079 23,049
Customer layaways 288,393 283,273
Sales tax 134,504 115,092
New York State audit accrued interest 35,000 50,000
Other 138,555 131,226
$811,455 $847,234

CURRENT PORTION OF LONG TERM LIABILITIES
1995 1994
Current portion of term loan to Bank $255,000 $ -
Deferred compensation agreement 60,481 74,949
Notes payable Audio Exchange (Note 4) 50,000
Notes payable truck financing (Note 4) 15,120 28,881
Accrued expenses restructured/
reclassified (legal fees) 183,083 207,687
Miscellaneous 16,344 -
$530,028 $361,517

OTHER LONG TERM LIABILITIES
1995 1994
Deferred compensation agreements $113,996 $180,785
Straight line impact of lease escalations 282,720 172,796
Accrued expenses restructured/reclassified
(legal fees) 184,230 179,313
Other - 50,000
$580,946 $582,894

OTHER MATTERS

In connection with the refinancing on May 2, 1994 (see Note 4),
the Company s chief executive officer/chairman ( officer )
purchased from the Company certain life insurance policies and
their related cash surrender values ($153,371). In consideration,
the Company received a promissory note bearing interest at 6%
from such officer, which is included in other long-term assets,
to be repaid in six equal installments beginning January 1, 1997.
Interest and principal payments on the note were pledged to
Congress by the Company and, in addition, the officer provided a
limited guarantee of up to $150,000 to Congress relating to the
revolving credit facility.

Legal fees payable to a law firm, a partner of which is a
director/shareholder/Debenture holder of the Company were
$239,000 and $210,000, at January 28, 1995 and January 29, 1994,
respectively.

The financial statement caption, "Interest and Other Income"
includes $135,059, $489,076 and $557,004 of interest, consulting
and other income relating to proceeds of the sale of the Boerner
Division, for fiscal 1995, 1994 and 1993, respectively.

10. NEW STORE OPENINGS

On September 4, 1993, the Company opened a new retail store
located within ABC Carpet and Home ("ABC"), a New York City based
specialty retailer of high quality home furnishings and carpets.
This new merchandising alliance was completed pursuant to a five
year License Agreement ("License Agreement") between the Company
and C&W Furniture, Inc., a subsidiary of ABC (see Note 4).

At anytime after the first year, the Company has the right to
terminate the License Agreement if net sales for the new store
(as defined) are less that $1,500,000 for any year. ABC has the
right to terminate the License Agreement after the second year if
a default of any substantial performance provision (as defined)
occurs.

On October 30, 1994 the Company opened a new retail store located
on 57th Street in Manhattan. Accordingly, the Company entered
into a ten year lease for this new store (see Note 4).

11. PROPOSED PRIVATE PLACEMENT AND RELATED RESTRUCTING OF CERTAIN DEBT

On March 13, 1995 the Company announced that it would seek to
raise up to $4,200,000, prior to the payment of fees and
expenses, of new equity with the issuance of up to 12,000,000
shares of common stock pursuant to the terms of a Placement
Agreement (the "Placement") entered into between the Company and
Janssen-Meyers Associates, L.P. ("Janssen-Meyers"). The Placement
will be on a best efforts all or none basis as to 7,500,000
shares and a best efforts basis as to an additional 4,500,000
shares. It is anticipated that the price per share sold in the
Placement will be between $.35 and $.38. In connection with the
Placement, the Company will issue to Janssen-Meyers, seven-year
warrants to acquire up to 2,750,000 shares of the Company s
common stock at an exercise price of 120% of the price that
shares are sold in the Placement.

In connection with the Placement, the Company also entered into a
letter agreement with Capital Vision Group, Inc. ("CVG") pursuant
to which the Company has agreed, among other things, to retain
CVG as its financial and business advisor upon completion of the
Placement. As compensation for CVG's services, the Company
agreed, contingent upon and following the completion of the Placement,
to pay CVG a cash fee equal to $6,000 per month and to grant CVG
seven-year warrants to purchase 5,000,000 shares of common stock at
an exercise price of $.50 per share. The Company would also pay to
CVG a bonus equal to 10% of the Company s pre-tax earnings
exceeding $500,000 in any given fiscal year (subject to
adjustment for any fiscal year which is for a period of less than
twelve months).

The proposed Placement is subject to certain conditions including
shareholder approval and the restructuring of certain existing
subordinated convertible and nonconvertible Debentures. This
restructuring will require that such Debentures (aggregating
$1,057,405) either (1) convert to common stock of the Company at
an exchange rate equal to the price that shares of common stock
are sold in the Placement or (2) exchange such Debentures for a
new series of convertible subordinated Debentures bearing an
interest rate of 11% per annum, maturing on July 1, 2000 and
convertible into shares of common stock at a conversion price of
$1.15 per share. To the extent that Convertible Subordinated
Debenture holders elect to convert their debt into Common Stock,
the Company would be required to recognize a charge equal to the
value of the Common Stock issued in the conversion in excess of
the value of the Common Stock that would have been currently
received under the original conversion terms.

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

THE HARVEY GROUP INC. AND SUBSIDIARIES

COL. A COL. B COL. C COL. D COL. E
ADDITIONS

Additions Charged to Other
Balance charged to other changes - Balance
at beginning costs and accounts add (deduct) at end
Description of period expenses - describe - describe of period

FISCAL YEAR ENDED
JANUARY 28, 1995
Reserves and
allowances
deducted from
assets
accounts:

Allowance for
doubtful $12,500 $13,000 $(500)(1) $25,000
accounts

FISCAL YEAR ENDED
JANUARY 29, 1994
Reserves and
allowances
deducted from
asset
accounts:
Allowance for
doubtful
accounts $10,000 $11,488 $(8,988)(1) $12,500

FISCAL YEAR ENDED
JANUARY 30, 1993
Reserves and
allowances
deducted from
asset accounts:
Allowance for
doubtful
accounts $95,000 $43,717 (2) $(128,717)(1) $10,000
4% reserve for
reduced
commission base 180,850 (180,850) 0

(1) Uncollectible accounts written off, net of recoveries.
(2) Uncollectible accounts written off and charged to accrued costs relating to
discontinued operations.

ITEM 9. CHANGES AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to directors and executive officers of
the Company will be included in the Company s Proxy Statement
(the "Proxy Statement") for its annual meeting of shareholders
which is expected to be filed within 120 days from the end of the
fiscal year and such information is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to executive compensation is
incorporated herein by reference to the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

Information with respect to security ownership of certain
beneficial owners and management is incorporated herein by
reference to the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to certain relationships and related
transactions is incorporated herein by reference to the Proxy
Statement.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K

(a)(1) and (2) LISTING OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES

The response to this portion of Item 14 is submitted under Item 8 -
"Financial Statements and Supplemental Data" of this report.

(3) LISTING OF EXHIBITS*
INCORPORATED BY
REFERENCE
SEC File No. I-4626,
Filing and Filed
Description Exhibit No. Herewith

(3) (a) Restated Certificate of December 1967
Incorporation of the Registrant 8-K Exhibit 3
(b) Certificate of Amendment to Restated September 1968
Certificate of Incorporation of the 8-K Exhibit 1
Registrant
(c) Certificate of Amendment to Restated June 1969
Certificate of Incorporation of the 8-K Exhibit I
Registrant
(d) Certificate of Amendment to Restated May 1971
Certificate of Incorporation of the 8-K Exhibit I
Registrant
(e) Certificate of Amendment to Restated August 1971
Certificate of Incorporation of the 8-K Exhibit I
Registrant
(f) Certificate of Amendment of the July 30, 1988
Certificate of Incorporation of The 10-Q Exhibit 3h
Harvey Group Inc.
(g) By-laws of The Harvey Group Inc. July 30, 1988
10-Q Exhibit 3f
(4) (a) Form of 10% Subordinated Debentures due January 31, 1981
July 1, 1993 10-K Exhibit 4
(b) Form of Waiver and Consent given by February 1, 1992
the holders of the 10% Subordinated 10-K Exhibit
Debentures due July 1, 1993 4(b)

* Exhibits are not contained herein except as noted. The Company will
furnish any exhibits upon the payment of a fee equivalent to the expenses
in furnishing such exhibits upon written request directed to
Joseph J. Calabrese, Jr., Secretary.

(10) (a) Agreement of lease dated October 17, January 31, 1981
1980, between Joseph P. Day Realty 10-K Exhibit 10o
Corp., as agent for landlord and The
Harvey Group Inc. as tenant relating
to the premises at 2 West 45th Street
utilized by the Registrant as
a retail store. Period of lease July 1,
1983 to June 30, 1995.
(b) Agreement of lease dated October 18, February 1, 1986
1985, between Sprout Development 10-K Exhibit 10g
Co. as landlord and Harvey
Electronics of Paramus, Inc., as
tenant relating to the premises at
556 Route 17 North, Paramus, New
Jersey 07652, utilized by the
Registrant as a retail store.
Period of lease November 1, 1985 to
October 31, 1995.
(c) Agreement of lease dated October 5, January 28, 1989
1988, between Puntillo Limited 10-K Exhibit 10o
Partnership, landlord and The
Harvey Group, Inc., as tenant
relating to the premises at 3
Expressway Plaza, Roslyn, New York.
Period of lease April 1, 1989 to
March 31, 1999.
(d) Lease Modification Agreement made January 28, 1989
this 24th day of January 1989 by 10-K Exhibit 10p
and between The Harvey Group Inc.,
a tenant; and Puntillo Limited
Partnership, a landlord to modify
agreement of lease dated October 5,
1988.
(e) The Harvey Group Inc., 1988 Stock July 30, 1988
Option Plan 10-Q Exhibit 4b
(f) Agreement of lease dated November 2, January 27, 1990
1989, between Venture 600. A Joint 10-K Exhibit 10s
Venture General Partnership, as
landlord and Harvey Sound Inc. as
tenant related to the premises at
600 Secaucus Road, Secaucus, New
Jersey, utilized by the Registrant
as a warehouse, outlet store and
administrative office. Period of
lease January 1, 1990 to March 31,
1999.
(g) Assignment and Assumption Agreement January 27, 1990
dated May 4, 1989 by and between 10-K Exhibit 10t
Audio Exchange of Westbury, Inc.
(the assignor) and The Harvey
Group, Inc. (the assignee) and
Agreement of lease dated January 1,
1985 between Century Investors
Corporation, as landlord and Audio
Exchange o Westbury, Inc., as
tenant relating to premises at 485
Old Country Road, Westbury,
utilized by the Registrant as a
retail store.
(h) Asset Purchase Agreement, dated as January 30, 1992
of January 17, 1992, as amended as Form 8-K
of January 23, 1992, by and between Exhibit 28.5
The Harvey Group, Inc. and Merkert
Enterprises, Inc.
(i) Continuing general security Form 10-Q for
agreement for The Harvey Group, the Quarter ended
Inc. dated August 16, 1991 August 3, 1991
Exhibit 2
(j) Continuing general security Form 10-Q for
agreement for Harvey Sound, Inc. the Quarter ended
dated August 16, 1991. August 3, 1991
Exhibit 3
(k) Continuing general security Form 10-Q for
agreement for Harvey Electronics of the Quarter ended
Paramus, Inc., dated August 16, August 3, 1991
1991. Exhibit 4
(l) Guarantee agreement by Harvey Sound, Form 10-Q for
Inc. dated August 16, 1991. the Quarter ended
August 3, 1991
Exhibit 5
(m) Guarantee agreement by Harvey Form 10-Q for
Electronics of Paramus, Inc., dated the Quarter ended
August 16, 1991. August 3, 1991
Exhibit 6
(n) Lessor's Consent, Certificate and February 1, 1992
Lease Modification Agreement by and 10-K Exhibit (gg)
between LKM Expressway Plaza
Limited Partnership (formerly known
as Puntillo Limited Partnership),
The Harvey Group Inc. and Merkert
Enterprises.
(o) Promissory Note dated May 15, 1992 February 1, 1992
issued by The Harvey Group, Inc. to 10-K Exhibit (hh)
Kelly Drye and Warren in the
principal amount of $360,000.
(p) Form of Common Stock and Form 8-K dated
Subordinated Convertible Debenture August 7, 1992
Subscription and Registration Exhibit 28(b)
Rights Agreement.
(q) Form of Convertible Subordinated Form 8-K dated
Debenture due July 1, 1997 issued August 7, 1992
by The Harvey Group. Exhibit 28(c)
(r) Amendment to Prime Lease and Form 10-Q for
Termination Agreement dated the Quarter ended
July 8, 1992. August 1, 1992
Exhibit 1
(s) Sublease Amendment and Termination Form 10-Q for
Agreement dated July 8, 1992. the Quarter ended
August 1, 1992
Exhibit 2
(t) Assignment Agreement dated July 8, Form 10-Q for
1992. the Quarter ended
August 1, 1992
Exhibit 3
(u) Consent and Release Agreement with Form 10-Q for
National Westminster Bank USA dated the Quarter ended
July 1, 1992. August 1, 1992
Exhibit 4
(v) Exchange Agreement between The Form 10-K
Harvey Group and Windcrest Partners January 30, 1993
Exhibit (kk)
(w) Employment Agreement between The Form 10-K
Harvey Group and Arthur Shulman. January 30,
1993 Exhibit (ll)
(x) Letter Agreement, dated April 16, Form 10-K
1993, between The Harvey Group and January 30,
Merkert Enterprises, Inc. 1993 Exhibit (mm)
(y) Consent to Extension of Maturity and Form 10-K
letter of Transmittal dated July January 30,
28, 1992. 1993 Exhibit (nn)
(z) Store Financing Loan Agreement dated Form 10-Q for
August 31, 1993. the Quarter ended
July 31, 1993
(aa) Subordinated Convertible Promissory Form 10-Q for
Note dated August 31, 1993. the Quarter ended
July 31, 1993
(bb) Security Agreement between The Harvey Form 10-Q for
Group Inc. the Quarter ended
and Interequity Capital Partners, L.P. July 31, 1993
dated August 31, 1993.
(cc) Security Agreement between Harvey Sound Form 10-Q for
Inc. and Interequity Capital Partners, the Quarter ended
L.P. dated August 31, 1993. July 31, 1993
(dd) Unlimited Continuing Guaranty by Harvey Form 10-Q for
Sound Inc. dated August 31, 1993. the Quarter ended
July 31, 1993
(ee) Third Party Pledge Agreement Form 10-Q for
(intercreditor agreement between The the Quarter ended
Harvey Group Inc., Interequity Capital July 31, 1993
Partners, L.P. and National Westminster
Bank U.S.A. dated August 31, 1993
(ff) License Agreement dated July 30, 1993. Form 10-Q for
Quarter ended
July 31, 1993
(gg) Loan and Security Agreement between Form 10-K
Congress Financial Corporation and January 30,
The Harvey Group Inc. and Harvey Sound 1994 Exhibit
Inc. dated May 2, 1994. (qq)
(hh) Guarantee to Congress Financial Form 10-K
Corporation by The Harvey Group Inc. January 30,
dated May 2, 1994 1994 Exhibit (rr)
(ii) Guarantee to Congress Financial Form 10-K
Corporation by Harvey Sound Inc. January 30,
dated May 2, 1994 1994 Exhibit (ss)
(jj) Subordination and Intercreditor Form 10-K
Agreement between Congress Financial January 30,
Corporation, National Westminster 1994 Exhibit (tt)
Bank U.S.A. and Interequity Capital
Partners, L.P., dated May 2, 1994.
(kk) Amendment Agreement to Interest Bearing Form 10-K
Grid Not dated August 16, 1991 with January 30,
National Westminster Bank U.S.A. 1994 Exhibit (uu)
dated May 2, 1994.
(ll) Waiver and Amendment Agreement to Store Form 10-K
Financing Loan Agreement dated January 30,
August 31, 1993, dated May 2, 1994. 1994 Exhibit (vv)
(mm) Amendment to Asset Purchase Agreement Form 10-K
dated January 17, 1992 between Merkert January 30,
Enterprises Inc. and The Harvey Group 1994 Exhibit (ww)
Inc., dated May 2, 1994.
(nn) Promissory Note issued by Harvey E. Form 10-K
Sampson to T Harvey Group Inc. dated January 30,
May 2, 1994. 1994 Exhibit (xx)
(oo) Limited Guarantee by Harvey E. Sampson Form 10-K
to Congress Financial Corporation January 30,
dated May 2, 1994. 1994 Exhibit (yy)
(pp) Stock Pledge Agreement between The Form 10-K
Harvey Group Inc. and Congress January 30,
Financial Corporation dated May 2, 1994 Exhibit (zz)
1994.
(qq) Supplemental Store Financing Loan Form 10-Q for the
Agreement date August 30, 1994. Quarter ended
July 30, 1994
Exhibit 1
(rr) Subordinated Promissory Note dated Form 10-Q for the
August 30, 1994. Quarter ended
July 30, 1994
Exhibit 2
(ss) Amendment No. 1 to the Subordination Form 10-Q for the
and Intercreditor Agreement between Quarter ended
The Harvey Group Inc., Congress July 30, 1994
Financial Corporation InterEquity Exhibit 3
Capital Partners, L.P. and National
Westminster Bank U.S.A. dated
August 30, 1994.
(tt) Warrant Agreement dated August 30, Form 10-Q for the
1994 between The Harvey Group Inc. Quarter ended
and InterEquity Capital Partners, L.P. July 30, 1994
Exhibit 4
(uu) Lease Agreement dated September 2, Form 10-Q for the
1994 between Musart Associates and Quarter ended
The Harvey Group Inc. July 30, 1994
Exhibit 5
(vv) Letter Agreement dated March 10, 1995, March 10, 1995
by and between The Harvey Group Inc. Form 8-K
and Janssen-Meyers Associates, L.P. Exhibit 99.1
(ww) Letter Agreement dated March 9, 1995, March 10, 1995
by and between The Harvey Group Inc. Form 8-K
and Capital Vision Group. Exhibit 99.2
(xx) Press Release dated March 13, 1995, March 10, 1995
issued by The Harvey Group Inc. Form 8-K
Exhibit 99.3
(yy) Lease Modification and Extension x
Agreement dated January 26, 1995
between Joseph P. Day Realty Corp. and
The Harvey Group Inc.

(21) Subsidiaries of the Registrant as required by Regulation S-K of Item
601.

(23) Consent of Ernst & Young LLP, Independent Auditors.

(b) Reports on Form 8-K filed in the Fourth
Quarter of Fiscal Year Ended
January 28, 1995

No reports on Form 8-K were filed
during the fourth quarter
of the fiscal year ended January 28, 1995

Exhibits as required by Item 601 of the Regulation S-K are
listed in Section (a)(3) above.

(d) Financial Statement Schedules

The response to this portion of Item 14 is submitted under
Item 8 - "Financial Statements and Supplemental Data" of this report.

SIGNATURES

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

The Harvey Group Inc.
_____________________________________
(Registrant)

/s/ Arthur Shulman May 8, 1995
______________________________________
Arthur Shulman, President (Date)
and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.

/s/ Joseph J. Calabrese, Jr. May 8, 1995
__________________________________________ __________________________
Joseph J. Calabrese, Jr., Vice President, (Date)
Secretary, Chief Financial Officer, Chief
Accounting Officer

/s/ Michael E. Gellert May 8, 1995
____________________________________________ ___________________________
Michael E. Gellert, Director (Date)

/s/ Mark N. Kaplan May 8, 1995
____________________________________________ ___________________________
Mark N. Kaplan, Director (Date)

/s/ William F. Kenny III May 8, 1995
____________________________________________ ___________________________
William F. Kenny, III, Director (Date)

/s/ Harvey E. Sampson May 8, 1995
____________________________________________ ___________________________
Harvey E. Sampson, Chairman of the Board (Date)

/s/ Arthur Shulman May 8, 1995
____________________________________________ ___________________________
Arthur Shulman, Director (Date)

EXHIBIT INDEX

Exhibit No. Description

10 (yy) Lease Modification and Extension
Agreement dated January 26, 1995
between Joseph P. Day Realty Corp.
and The Harvey Group Inc.

21 Subsidiaries of the Registrant as
required by Regulation S-K Item 601.

23 Consent of Ernst & Young LLP,
Independent Auditors

LEASE MODIFICATION AND EXTENSION AGREEMENT

AGREEMENT made this 26th day of January, 1995
between JOSEPH F. DAY REALTY CORP., as agent
("Landlord"), 9 East 40th Street, New York, New York
10016, and THE HARVEY GROUP, INC. ("Tenant"), with
corporate offices at 600 Secaucus Road, Secaucus, New
Jersey 07094;

W I T N E S S E T H:

WHEREAS, the parties are landlord and tenant
respectively under lease dated October 17, 1980 (the
"Lease") for store and mezzanine and part of the basement
at 2 West 45th Street, New York, New York; and

WHEREAS, the parties wish to modify the Lease
and as modified to extend the term thereof;

NOW, THEREFORE, the parties agree as follows:

1. The term of the Lease shall be extended for
a term of ten years commencing July 1, 1995 and ending
June 30, 2005 (the "Extended Term").

2. Effective February 1, 1995 and for the
balance of the term of the Lease and throughout the
Extended Term, the Lease shall be modified as follows:

(a) the fixed annual rent shall be
$427,182.08 per annum;

(b) Tenant shall pay Real Estate Tax
escalation pursuant to Article 35 of the Lease. The Tax
Base Year shall be the Fiscal Year 1994/95, in lieu of
1982/83. Tax escalation payments shall be due in the
same number of installments as Landlord shall pay real
estate taxes to the taxing authority and each such
installment shall be due upon billing therefor but no
more than 30 days before each installment is due to be
paid to the taxing authority. Article 35 shall be
further modified by adding at the end thereof the
following provision:

It is understood by Tenant that Landlord
may obtain and accept reductions in the proposed
assessed valuation of the Building in a settlement
in a Tax Year during the term of this Lease before
the Landlord has paid the Taxes and such reduction
will substantially reduce the real estate tax
escalation for the Tax Year due from Tenant under
this Article. Tenant therefore agrees the expenses
of the Landlord in obtaining such reduction,
including reasonable legal fees, accounting fees,
appraisal fees and other expenses shall be deemed to
be Taxes paid for the Tax Year of said reduction.

In the event the Taxes for any Tax Year
during the term of this Lease shall be reduced after
Tenant shall have paid Tenant's share of any excess
thereof in respect of such Tax Year pursuant to this
Article, Landlord shall allow Tenant a credit
against future rent, or issue a refund to Tenant (if
the term of this Lease shall have expired) in the
amount of Tenant's share of the refund (including
any interest paid on such refund by the taxing
authority) of such Taxes received by Landlord (after
deduction of expenses, including legal fees,
accounting fees, appraisal fees and other expenses
incurred by Landlord in obtaining such refund);

(c) Landlord shall pay Labor Rate
escalation under Article 36 of the Lease. Base Labor
Rate shall mean the Labor Rate in effect on December 31,
1994;

(d) Tenant shall pay Operating Expense
escalation under Article 37 of the Lease, if Landlord
exercises its option under such Article. Base Year shall
mean the calendar year 1994, in lieu of 1982;

(e) Tenant shall pay heating costs under
Article 36 if the same exceed those for the calendar year
1994, in lieu 1980;

(f) Article 44 on electricity shall be
modified by deleting the last seven lines thereof and
inserting in lieu thereof the following:

Pursuant to the Lease between the parties
hereto, the minimum rental reserved is the sum of
$35,598.51 per month. Tenant agrees that pending a
0survey as above provided that its space minimum
rental shall be increased by the amount of $5,068.16
per month making a total minimum rental of
$40,666.67 per month payable in advance on the first
day of each and every month (in no event shall this
minimum rental for furnishing electricity be reduced
below the aforesaid amount for as long as Landlord
is furnishing electricity) and for and in
consideration of such increase in the rental, the
Landlord is to supply the Tenant with free
electricity.

(g) In the event that prior to execution
of this Agreement Tenant has paid any of the escalations
set forth in this paragraph 2, allocable to the period
after the effective date of this Agreement, Tenant shall
receive a credit against future rent and escalations for
any overpayment of any such escalation prorated to the
effective date set forth above.

3. (A) In the event Tenant advises Landlord
that Tenant desires to assign the Lease or sublet the
entire premises, Landlord without guaranteeing the
success of the efforts and even if Tenant is in default
agrees to do the following:

(i) cause the managing agent for the
building in its reasonable judgment to determine the
market value for the demised premises and notify
Tenant thereof;

(ii) list the space with other
brokers and follow up with such other brokers
periodically;

(iii) contact by letter or telephone
potential subtenants or assignees identified in
writing by Tenant;

(iv) Advertise the demised premises
and Tenant shall pay the cost of such advertising
provided that Landlord will not incur advertising
expenses in excess of $5,000 without Tenant's
consent.

(B) In the event Tenant assigns this Lease or
sublets all or substantially all of the demised premises
and thereafter Landlord collects any profit made by
Tenant on such assignment or subletting and provided
further that subsequent to collecting such profit for a
period of time, the assignee or sublessee defaults,
Landlord agrees that Tenant will then receive as a credit
against rent and escalations due from Tenant to Landlord
after the date of such default the amount of such profit
previously collected by Landlord less expenses incurred
by Landlord in connection with such reletting or
assignment.

4. Article 50(g) shall be deleted and there
shall be inserted in lieu thereof the following:

If the Landlord shall give its consent to
any assignment of this Lease or to any sublease,
Tenant, in consideration therefor, shall pay to
Landlord, as additional rent:

(i) In the case of an assignment, an
amount equal to all sums and other considerations
paid to Tenant by the assignee for or by reason of
such assignment (including, but not limited to, sums
paid for the sale of Tenant's fixtures, leasehold
improvements, equipment, furniture, furnishings,
inventory and other personal property, less, in the
case of a sale thereof, the then net undepreciated
cost thereof determined on the basis of Tenant's
Federal income tax returns and as regards Tenant's
inventory, less Tenant's cost thereof) less the
unamortized costs of Tenant's improvements to the
space as determined on the basis of Tenant's Federal
income tax returns and less Tenant's brokerage costs
and alteration expenses in such transaction; and

(ii) In the case of a sublease, any
rents, additional charges or other consideration
payable under the sublease and related agreements to
Tenant by the subtenant which is in excess of the
fixed annual rent and additional rent accruing
during the term of the sublease pursuant to the
terms of this Lease (including, but not limited to,
sums paid for the sale or rental of Tenant's
fixtures, leasehold improvements, equipment,
furniture, furnishings, inventory and other personal
property, less, in the case of the sale thereof, the
then undepreciated cost thereof determined on the
basis of Tenant's Federal income tax returns and as
regards Tenant's inventory, less Tenant's cost
thereof) less the unamortized costs of Tenant's
improvements to the space as determined on the basis
of Tenant's Federal income tax returns and less
Tenant's brokerage costs and alteration expenses in
such transaction.

5. It is agreed between the parties that
Tenant has deposited no security under the Lease.
Articles 53, 67 and 68(b) of the Lease shall not apply
after the effective date of this Agreement (February 1,
1995).

6. This Agreement is offered to Tenant for
signature by the managing agent of the Building solely in
its capacity as such agent and subject to Landlord's
acceptance and approval. Tenant shall affix its
signature hereto with the understanding that such act
shall not, in any way, bind Landlord or its agent until
such time as this Agreement shall have been approved and
executed by the managing agent or the Landlord and
delivered to Tenant.

7. Tenant covenants, warrants and represents
that there was no broker except Joseph P. Day Realty
Corp. instrumental in consummating this Agreement and
that no conversations or negotiations were had with any
broker except Joseph P. Day Realty Corp. concerning the
terms of this Agreement. Tenant agrees to hold Landlord
harmless against any claims for a brokerage commission
arising out of any conversations or negotiations had by
Tenant with any broker except Joseph P. Day Realty Corp.

8. Except as specifically modified herein,
Landlord and Tenant ratify, confirm, accept and agree to
all of the terms, covenants and conditions of the Lease.

9. This Agreement shall inure to the benefit
of and bind the parties hereto, their legal
representatives, successors and assigns.

IN WITNESS WHEREOF, the parties have hereunto
set their hands and seals the day and year first above
written.

JOSEPH P. DAY REALTY CORP., as agent
(Landlord)

By: __________________________________

THE HARVEY GROUP, INC.
(Tenant)

By: ___________________________________

EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT

STATE OF
NAME INCORPORATION

Harvey Sound, Inc. New York

Harvey International Sales Corporation (1) Delaware

Components Plus, Inc. (1) New York

Harvey Radio Co., Inc. (1) Delaware

Harvey Radio Co., Inc. (1) Michigan

(1) These inactive subsidiaries, along with all other listed
subsidiaries, are included in the financial statements of
the Company contained elsewhere herein.

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 2-78032 and Form S-8 No. 33-27250)
pertaining to the stock option plans of The Harvey Group Inc. and
in the related Prospectus of our report dated March 24, 1995,
with respect to the consolidated financial statements and
schedule of The Harvey Group Inc. included in the Annual Report
(Form 10-K) for the fiscal year ended January 28, 1995.

ERNST & YOUNG LLP

May 8, 1995