UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 29, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------ ------------------
Commission File Number 1-4626
Harvey Electronics, Inc.
(Exact name of small business issuer as specified in its charter)
New York 13-1534671
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
205 Chubb Avenue, Lyndhurst, New Jersey
(Address of principal executive offices)
201-842-0078
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [X] No [ ]
As of March 3, 2000, 3,282,833 shares of the issuer's common stock were
outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
Harvey Electronics, Inc.
FORM 10-QSB
INDEX
PART I. Financial Information
Item 1. Financial Statements:
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Page No.
Condensed Statements of Operations (Unaudited) - Thirteen weeks ended
January 29, 2000 and January 30, 1999 ............................. 3
Condensed Balance Sheets - January 29, 2000 (Unaudited) and October 30,
1999................................................................. 4
Condensed Statement of Shareholders' Equity (Unaudited) - Thirteen weeks
ended January 29, 2000 ............................................. 5
Condensed Statements of Cash Flows (Unaudited) - Thirteen weeks ended
January 29, 2000 and January 30, 1999 ............................ 6
Notes to Condensed Financial Statements (Unaudited)........................ 7
Item 2. Management's Discussion and Analysis or Plan of Operation .............. 9
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K ....................................... 15
Signatures ........................................................................... 15
</TABLE>
<PAGE>
Part I Financial Information
Item I. Financial Statements
Harvey Electronics, Inc.
Condensed Statements of Operations
(Unaudited)
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<S> <C> <C>
Thirteen Weeks Ended
January 29, January 30,
2000 1999
-----------------------------------------
Net sales $9,854,484 $6,408,484
Interest and other income 9,939 21,297
-----------------------------------------
9,864,423 6,429,781
-----------------------------------------
Cost of sales 6,008,241 3,876,170
Selling, general and administrative expenses 3,101,310 2,158,941
Interest expense 54,490 24,000
-----------------------------------------
9,164,041 6,059,111
-----------------------------------------
Net income before income tax equivalent provision
700,382 370,670
Income tax equivalent provision 260,000 40,000
-----------------------------------------
Net income 440,382 330,670
Preferred Stock dividend requirement (18,594) (18,594)
-----------------------------------------
Net income applicable to Common Stock $421,788 $312,076
=========================================
Net income per common share applicable to
common shareholders:
Basic and diluted net income per common share $.13 $.10
=========================================
Shares used in the calculation of net income
per common share:
Basic 3,282,833 3,282,833
=========================================
Diluted 3,336,857 3,282,833
=========================================
See accompanying notes.
</TABLE>
<PAGE>
Harvey Electronics, Inc.
Condensed Balance Sheets
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<S> <C> <C>
January 29, October 30,
2000 1999 (1)
(Unaudited)
Assets ---------------------------------
Current assets:
Cash and cash equivalents $33,914 $23,947
Accounts receivable, less allowance of $25,000 585,168 449,057
Note receivable--previous member of Underwriter 67,491 68,430
Inventories 5,000,515 4,920,614
Prepaid expenses and other current assets 390,494 351,962
---------------------------------
Total current assets 6,077,582 5,814,010
Property and equipment:
Leasehold improvements 1,530,140 1,498,585
Furniture, fixtures and equipment 1,169,622 1,145,228
---------------------------------
2,699,762 2,643,813
Less accumulated depreciation and amortization 812,272 717,272
---------------------------------
1,887,490 1,926,541
Equipment under capital leases, less accumulated amortization of $356,000 and
$348,000 120,624 141,012
Cost in excess of net assets acquired, less accumulated amortization of $8,500
and $7,000 141,500 143,000
Reorganization value in excess of amounts allocable to identifiable
assets, less accumulated amortization of $214,523 and $198,023 1,173,940 1,450,440
Note receivable--officer 15,000 15,000
Other assets, less accumulated amortization of $178,274 and $160,887 237,713 254,684
---------------------------------
Total assets $9,653,849 $9,744,687
=================================
Liabilities and shareholders' equity Current liabilities:
Revolving line of credit facility $153,635 $1,477,603
Trade accounts payable 2,482,995 1,943,225
Accrued expenses and other current liabilities 1,674,319 1,302,848
Income taxes 20,532 25,200
Cumulative Preferred Stock dividends payable 36,952 61,057
Current portion of capital lease obligations 46,426 78,880
---------------------------------
Total current liabilities 4,414,859 4,888,813
Long-term liabilities:
Cumulative Preferred Stock dividends payable - 30,625
Capital lease obligations 18,510 21,504
Deferred rent 194,030 199,083
---------------------------------
212,540 251,212
Commitments and contingencies
Shareholders' equity:
8-1/2% Cumulative Convertible Preferred Stock, par value $1,000 per share;
authorized 10,000 shares; issued and outstanding 875 shares (aggregate
liquidation preference--$875,000) 402,037 402,037
Common Stock, par value $.01 per share; authorized 10,000,000 shares;
issued and outstanding 3,282,833 shares 32,828 32,828
Additional paid-in capital 7,481,667 7,481,667
Accumulated deficit (2,890,082) (3,311,870)
---------------------------------
Total shareholders' equity 5,026,450 4,604,662
---------------------------------
Total liabilities and shareholders' equity $9,653,849 $9,744,687
=================================
(1) The balance sheet as of October 30, 1999 has been derived from the audited
financial statements at that date.
See accompanying notes.
</TABLE>
<PAGE>
Harvey Electronics, Inc
Condensed Statements of Cash Flows
(Unaudited)
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<S> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
January 29, January 30,
2000 1999
---------------------------------
Operating activities
Net income $440,382 $330,670
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 137,387 115,801
Income tax equivalent provision 260,000 40,000
Straight-line impact of rent escalations (5,053) 2,288
Changes in operating assets and liabilities:
Accounts receivable (136,111) (86,489)
Note receivable--previous member of Underwriter 939 1,443
Inventories (66,513) (217,504)
Prepaid expenses and other current assets 92,790 107,910
Trade accounts payable 539,770 34,061
Accrued expenses, other current liabilities and
income taxes 235,481 (117,138)
---------------------------------
Net cash provided from operating activities 1,499,072 211,042
Investing activities
Purchases of property and equipment (55,949) (287,460)
Purchase of other assets (416) (21,260)
---------------------------------
Net cash used in investing activities (56,365) (308,720)
---------------------------------
Financing activities
Net (payments) proceeds from revolving credit facility (1,323,968) -
Preferred Stock dividends paid (73,324) -
Principal payments on capital lease obligations (35,448) (971)
---------------------------------
Net cash used in financing activities (1,432,740) (971)
---------------------------------
Increase (decrease) in cash and cash equivalents 9,967 (98,649)
Cash and cash equivalents at beginning of period 23,947 221,444
---------------------------------
Cash and cash equivalents at end of period $33,914 $122,795
=================================
Supplement cash flow information:
Interest paid $74,000 $50,000
=================================
Taxes paid $5,000 $11,000
=================================
See accompanying notes.
</TABLE>
<PAGE>
1. Basis of Presentation and Description of Business
Basis of Presentation
The accompanying unaudited financial statements of Harvey Electronics, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial reporting and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
Operating results for the thirteen week period ended January 29, 2000 are not
necessarily indicative of the results that may be expected for the year ending
October 28, 2000. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-KSB for the
year ended October 30, 1999.
The preparation of the financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates and assumptions.
Description of Business
The Company is a specialty retailer of high quality audio/video consumer
electronics and home theater products in the Metropolitan New York area. Revenue
from retail sales is recognized at the time goods are delivered to the consumer
or, for certain installation services, when such services are performed and
accepted by the customer.
2. Advertising Expense
In accordance with Statement of Position 93-7, "Reporting of Advertising Costs,"
the Company's advertising expense, net of cooperative advertising allowances, is
charged to operations when the advertising takes place. In November 1999, the
Company implemented its new advertising campaign, which significantly increased
advertising expenditures, for the first time including, network and cable
television advertising. The production costs relating to the Company's
television commercial (approximating $120,000) were expensed in the first fiscal
quarter ended January 29, 2000. Advertising expense for the thirteen weeks ended
January 29, 2000 and January 30, 1999 was approximately $350,000 and $30,000,
respectively.
<PAGE>
3. Income Per Share
Basic and diluted income per share are calculated in accordance with SFAS No.
128, "Earnings Per Share". The basic income per common share for the thirteen
weeks ended January 29, 2000 and January 30, 1999 was computed based on the
weighted average number of common shares outstanding. Common equivalent shares
relating to stock options, aggregating 54,024, were included in the weighted
average number of common shares outstanding for the diluted earnings per share
computation. Common equivalent shares of approximately 131,250, relating to the
conversion of preferred stock, were not considered since their conversion rates
were greater than the fair market value of the Company's common stock, and thus
anti-dilutive.
4. Income Taxes
In connection with the Company's emergence from its reorganization proceeding
under Chapter 11 of the United States Bankruptcy Code on December 26, 1996, the
Company adopted Fresh Start Accounting in accordance with AICPA Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code." Fresh Start Accounting requires that the Company report an
income tax equivalent provision when there is book net income and a
pre-reorganization net operating loss carryforward. This requirement applies
despite the fact that the Company's pre-reorganization net operating loss
carryforward will be utilized to reduce the related income tax payable. The
current and any future year benefit arising from utilization of the
pre-reorganization carryforward is not reflected as a reduction of the tax
equivalent provision in determining net income, but instead is recorded first as
a reduction of reorganization value in excess of amounts allocable to
identifiable assets until exhausted and thereafter as a direct addition to
paid-in-capital.
During the thirteen weeks ended January 29, 2000 and January 30, 1999, the
income tax equivalent provision and the associated reduction of reorganization
value in excess of amounts allocable to identifiable assets amounted to $260,000
and $40,000, respectively. This income tax equivalent provision does not affect
the Company's tax liability and does not require a cash payment of a similar
amount.
5. Inventories
Inventories have been valued at average cost, based upon gross profit
percentages applied to sales.
6. Subsequent Event
On December 2, 1999, the Company signed a letter of intent with CoolAudio.com,
Inc. ("CoolAudio") to merge the two companies through the issuance of the
Company's common stock. On February 7, 2000, the Company and CoolAudio mutually
agreed to terminate their agreement in principle to merge, as the companies were
unable to conclude the negotiation of final terms of the proposed merger.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following management's discussion and analysis and this Form 10-QSB contain
forward-looking statements, which involve risks and uncertainties. When used
herein, the words "anticipate," "believe," "estimate," and "expect" and similar
expressions as they relate to the Company or its management are intended to
identify such forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company's actual results,
performance or achievements could differ materially from the results expressed
in or implied by these forward-looking statements. Historical results are not
necessarily indicative of trends in operating results for any future period.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made.
General
The following discussion should be read in conjunction with the Company's
audited financial statements for the fifty-two weeks ended October 30, 1999 and
October 31, 1998, included in the Company's Annual Report on Form 10-KSB.
Thirteen Weeks Ended January 29, 2000 as Compared to Thirteen Weeks Ended
January 30, 1999
Net income. The Company's pretax income for the first fiscal quarter ended
January 29, 2000 increased approximately 89% to $700,382, as compared to pretax
income of $370,670 for the same quarter last year. Net income for the first
quarter of fiscal 2000 increased to $440,382, as compared to $330,670 for the
same quarter last year. The Company recorded an income tax equivalent provision
for the thirteen weeks ended January 29, 2000 and January 30, 1999 of $260,000
and $40,000, respectively. This increased income tax equivalent provision for
the first quarter of fiscal 2000 does not affect the Company's tax liability or
require the use of cash.
The Company's net income for the thirteen weeks ended January 29, 2000, also
includes net advertising expense of $350,000 as compared to only $30,000 for the
same quarter last year. Included in advertising expense for the thirteen weeks
ended January 29, 2000, was approximately $120,000 of production costs relating
to the Company's television commercial. The discussion below further explains
the increase in net advertising expense.
Revenues. Sales for the first fiscal quarter ended January 29, 2000 totaled
$9,854,484, an increase of approximately $3,446,000 or 54% from the same quarter
last year. Comparable store sales for the first fiscal quarter ended January 29,
2000 increased approximately $2,549,000 or 40% from the same quarter last year.
<PAGE>
Sales have benefited from the Company's new advertising campaign, which was
implemented in November 1999. This successful campaign has significantly
increased advertising expenditures, which for the first time included network
and cable television advertising. This television advertising complimented the
Company's larger print ads, radio commercials, direct mail and Internet
advertising. Additionally, overall sales were positively affected by the strong
sales performance of our new Bang & Olufsen store in lower Manhattan, which
opened in July 1999, as well as additional sales from our product offerings on
eBay.
The Company experienced strong sales increases in all of its retail locations.
Comparable store sales rose 40% as the Company benefited from strong customer
demand for new, higher-priced digital products led by HDTV, HD ready projection
sets and DVD as well as flat-screen plasma televisions. Our custom installation
business continues to grow as the Company's customers opt for our quality,
in-home installations of these sophisticated products and home theaters.
Each of the Company's new Harvey retail stores (in Mount Kisco, Westchester
County and Greenvale, Long Island, which opened in November 1998, the beginning
of the first fiscal quarter of 1999) have shown significant improvement in their
second year of operations. The improvement in sales at these two stores
significantly impacted comparable store sales for the first quarter of fiscal
2000.
Costs and Expenses. Total cost of goods sold for the thirteen weeks ended
January 29, 2000 increased $2,132,071 or 55% from the same period last year.
This was primarily due to increased sales, as discussed above.
The gross profit margin for the first fiscal quarter ended January 29, 2000 was
39% as compared to 39.5% for the same quarter last year. The slight decrease in
the gross profit margin was due to a change in the mix of products sold,
primarily the increased sale of video products, which typically have lower gross
margins than audio products. The increase in video sales was primarily due to
additional customer demand for new technologies such as HDTV, DVD and plasma
flat-screen televisions. It should be noted that sales of these new products do
benefit from higher gross margins, as compared to commodity analog televisions
and VCR's. The Company's sales of video products accounted for 30.1% of its net
sales for the first quarter of fiscal 2000 as compared to 27.2% for the same
quarter last year. Additionally, the gross profit margin for the first quarter
of fiscal 2000, was positively affected by increased custom installation income,
where higher margins were realized, as compared to the same period last year.
Selling, general and administrative expenses ("SG&A expenses") increased 43.6%
or $942,369 for the first fiscal quarter ended January 29, 2000, as compared to
the same quarter last year. Comparable SG&A expenses increased 35.2% or $760,369
for the first quarter ended January 29, 2000, as compared to the same quarter
last year.
<PAGE>
The increase in total SG&A expenses was also affected by costs relating to the
new Bang & Olufsen store and additionally from costs relating to the Company's
e-commerce endeavors. Comparable SG&A expenses increased primarily from
additional advertising costs, payroll and payroll related items, professional
expenses, depreciation expense and various store operating expenses. The Company
also continues to incur additional expenses relating to the expansion of its
custom installation business and its training efforts.
Interest expense increased $30,490 or 127% in the first fiscal quarter ended
January 29, 2000, as compared to the same quarter last year. The increase was
due to borrowings under the revolving line of credit facility, which began in
March 1999. In the first quarter of fiscal 1999, there were no borrowings under
the revolving line of credit facility.
In connection with the Company's emergence from its reorganization proceeding,
the Company adopted Fresh Start Accounting. Fresh Start Accounting requires that
the Company report an income tax equivalent provision when there is book net
income and a pre-reorganization net operating loss carryforward. This
requirement applies despite the fact that the Company's pre-reorganization net
operating loss carryforward will be utilized to reduce the related income tax
payable. The current and any future year benefit arising from utilization of the
pre-reorganization carryforward is not reflected as a reduction of the tax
equivalent provision in determining net income, but instead is recorded first as
a reduction of reorganization value in excess of amounts allocable to
identifiable assets until exhausted and thereafter as a direct addition to
paid-in-capital.
During the thirteen weeks ended January 29, 2000 and January 30, 1999, the
income tax equivalent provision and the associated reduction of reorganization
value in excess of amounts allocable to identifiable assets amounted to $260,000
and $40,000, respectively. This income tax equivalent provision does not affect
the Company's tax liability and does not require a cash payment of a similar
amount.
Liquidity and Capital Resources
The Company's ratio of current assets to current liabilities was 1.38, or
$1,662,723 at January 29, 2000 as compared to 1.19, or $925,197, at October 30,
1999. At October 30, 1999, the balance outstanding under the Company's revolving
line of credit facility ($1,477,603) was classified as a current liability as
the line of credit was temporarily paid down in December 1999 from the increased
sales of the Christmas selling season. At January 29, 2000, only $153,635 was
outstanding under the revolving line of credit facility, which was also
classified as a current liability. The improvement in the current ratio was
positively impacted by the Company's first quarter pretax income and was offset
by an increase in accounts payable and accrued expenses and other current
liabilities.
Net cash provided from operating activities was $1,499,072 for the first fiscal
quarter ended January 29, 2000, as compared to $211,042 for the same quarter
last year. The improvement in cash provided from operating activities was due
primarily from the increase in pretax income of $329,712, coupled with an
increase in accounts payable, accrued expenses and other current liabilities of
$858,328, as mentioned above.
<PAGE>
Net cash used in investing activities was $56,365 for the first fiscal quarter
ended January 29, 2000, as compared to cash used of $308,720 for the same
quarter last year. Net cash used for the purchase of property and equipment was
$287,460, relating to new store openings in 1999, as compared to only $55,949 in
fiscal 2000, where net cash was used for various capital expenditures.
Net cash used in financing activities was $1,432,740 for the first fiscal
quarter of fiscal 2000, as compared to only $971 for the same quarter last year.
Financing activities for the first quarter of fiscal 2000 includes net payments
of $1,323,968, reducing the revolving line of credit facility and Preferred
Stock dividends paid of $73,324.
In November 1997, the Company entered into a three-year revolving line of credit
facility with Paragon Capital LLC ("Paragon") whereby the Company may borrow up
to $3,300,000 based upon a lending formula (as defined) calculated on eligible
inventory. The interest rate on borrowings up to $2,500,000 is 1% in excess of
the prime rate of interest (as defined). The rate charged on outstanding
balances over $2,500,000 is 1.75% above the prime rate (8.50% at January 29,
2000). A commitment fee of $49,500 was paid by the Company at closing (which is
being amortized over three years) and a facility fee ($24,750) of three-quarters
of one percent (.75%) of the maximum credit line will be charged in each fiscal
year. Monthly maintenance charges also exist under the line of credit. At March
3, 2000, there was $605,895 in outstanding borrowings under the Paragon
revolving line of credit facility. The increase in the Company's revolving line
of credit facility from the amount outstanding at January 29, 2000 ($153,635),
is primarily due to the funding of additional inventory. As of March 3, 2000,
the Company had $2,694,105 available to borrow under the revolving line of
credit facility.
The maximum amount of borrowings available to the Company under this line of
credit is limited to formulas prescribed in the loan agreement. The Company's
maximum borrowing availability is equal to 73% of acceptable inventory, less
existing borrowings and certain reserves as may have been established by
Paragon.
Pursuant to the credit facility, the Company cannot exceed certain advance rates
on eligible inventory and must maintain certain levels of net income or loss and
minimum gross profit margins. Additionally, the Company's capital expenditures
cannot exceed a predetermined amount.
Paragon obtained a senior security interest in substantially all of the
Company's assets. The revolving line of credit facility provides Paragon with
rights of acceleration upon the breach of certain financial covenants or the
occurrence of certain customary events of default. The Company is also
restricted from paying dividends on common stock, retiring or repurchasing its
common stock, and generally from entering into additional indebtedness (as
defined).
<PAGE>
On December 2, 1999, the Company announced it had reached an agreement in
principle with CoolAudio.com, Inc. ("CoolAudio") to merge the two companies in a
stock for stock transaction pursuant to which CoolAudio would have merged with
and into the Company. On February 7, 2000, the Company and CoolAudio mutually
agreed to terminate their agreement in principle to merge, as the companies were
unable to conclude the negotiation of final terms of the proposed merger.
The Company has 2,104,500 common stock warrants ("Warrants") outstanding from
its public offering of common stock and Warrants in fiscal 1998, (the
"Offering"). Each outstanding Warrant, is exercisable for one share of common
stock at 110% ($5.50 per share) of the Offering price, for a period of three
years commencing March 31, 2000. The Warrants are also redeemable (at $.10 per
Warrant), at the Company's option, commencing March 31, 2000 if the closing bid
price of the common stock for 20 consecutive trading days exceeds 150% of the
Offering price per share of $7.50.
The Company's management believes that the Company's overhead structure has the
capacity to support additional stores without significant increases in cost and
personnel, and, consequently, that revenues and profit from new stores will have
a positive impact on the Company's operations.
As Bang & Olufsen focuses on developing Bang & Olufsen licensed branded stores
("Branded Stores") throughout the world, it has canceled its dealer agreement
with the Company and, with one exception, all other retailers effective May 31,
1999. Since this date, Bang & Olufsen products are available only in Branded
Stores.
The Company opened its first Bang & Olufsen Branded Store in the Union Square
area of lower Manhattan in July 1999. This Branded Store is the first of two
stores the Company plans to open in Manhattan. The Company has not identified a
location or lease agreement for a second Bang & Olufsen store. The Company's
existing Branded Store sells highly differentiated Bang & Olufsen products,
including uniquely designed audio systems, speakers, telephones, headphones and
accessories and other approved non-Bang & Olufsen products. The store also
offers professional custom installation of multi-room audio and home theater
systems.
The Company received a commitment from Bang & Olufsen permitting, but not
requiring, the Company to open two additional Branded Stores in Manhattan and
Connecticut. Pursuant to this commitment, the Company must agree to pursue these
locations by May 2000. In the first quarter of fiscal 2000, the Company received
an option from Bang & Olufsen to open a third Branded Store in the Greenwich,
Connecticut area. As a result, the Company is currently negotiating a lease for
a new Bang & Olufsen store in Greenwich, Connecticut. No assurance can be given
about the number of Branded Stores that the Company will open.
<PAGE>
Capital expenditures necessary for each 1,500 square foot Bang & Olufsen store,
including inventory, should be approximately $350,000.
The Company seeks to open an additional Harvey Electronics store in New Jersey
within the next eighteen months, if the appropriate location can be obtained or
an existing business can be acquired. The Company estimates that the total cost
of opening a new Harvey Electronics retail store is approximately $650,000. The
estimated cost of opening this store includes the cost of leasehold
improvements, including design and decoration, machinery and equipment,
furniture and fixtures, security deposits, opening inventory (net of the portion
to be borrowed from the Company's lender), legal expense, pre-opening expenses
and additional advertising and promotion in connection with the opening.
The Company intends to continue to redirect and substantially increase its
marketing expenditures, which began in the first quarter of fiscal 2000. This
will broaden the Company's media presence with the continuation of cable and
network television advertising.
Management believes that cash on hand, cash flow from operations and funds made
available under the credit facility with Paragon, will be sufficient to meet the
Company's anticipated working capital needs and expansion plan for at least the
next twelve-month period.
During the periods presented, the Company was not significantly impacted by the
effects of inflation. The Company did benefit from a strong Christmas demand in
November and December 1999.
Year 2000 Modifications
In fiscal 1999, the Company successfully implemented all Year 2000 modifications
to upgrade its operating systems. Currently, the Company's computer environment
is operating as designed, as all systems are Year 2000 compliant. The Company
does not anticipate any additional material capital expenditures or management
efforts in this regard for fiscal 2000.
<PAGE>
PART II. OTHER INFORMATION:
Items 1, 2, 3, 4 and 5 were not applicable in the first quarter ended January
29, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K
On February 7, 2000, the Company filed a report on Form 8-K. The event reported
related to the mutual termination of an agreement in principle to merge the
Company with CoolAudio.com, Inc. ("CoolAudio"). The companies terminated their
agreement in principle to merge, which was originally signed on December 2,
1999, as they were unable to conclude the negotiation of final terms of the
proposed merger.
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized on March 6, 2000.
Harvey Electronics, Inc.
By:/s/
---------------------------
Franklin C. Karp
President
By:/s/
---------------------------
Joseph J. Calabrese
Executive Vice President,
Chief Financial Officer, Treasurer &
Secretary
<PAGE>
Harvey Electronics, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Preferred Common
Stock Stock
--------------------------------------------------------------------------------
Shares Amount Shares Amount
--------------------------------------------------------------------------------
Balance at October 30, 1999 875 $402,037 3,282,833 $32,828
Net income for the thirteen weeks ended
January 29, 2000 - - - -
Preferred Stock dividend - - - -
--------------------------------------------------------------------------------
Balance at January 29, 2000 875 $402,037 3,282,833 $32,828
================================================================================
Additional Total
Paid-In Accumulated Shareholders'
Capital Deficit Equity
-------------------------------------------------------------------------------
Balance at October 30, 1999 $7,481,667 $(3,311,870) $4,604,662
Net income for the thirteen weeks ended
January 29, 2000 - 440,382 440,382
Preferred Stock dividend - (18,594) (18,594)
------------------------------------------------------------------------------
Balance at January 29, 2000 $7,481,667 $(2,890,082) $5,026,450
==============================================================================
See accompanying notes.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000046043
<NAME> Harvey Electronics, Inc.
<S> <C>
<PERIOD-TYPE> 3-MOS
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