<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1998
or
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 0-23000
The Harvey Entertainment Company
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(Exact name of registrant as specified in its charter)
California 95-4217605
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1999 Avenue of the Stars, Suite 2050, Los Angeles, California 90067-6055
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(Address of principal executive offices)
Registrant's phone number, including area code (310) 789-1990
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Former name, former address and former fiscal year, if changed since last
report.
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 13, 1998
---------------- --------------------------------
Common 4,186,941
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
INDEX
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<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I
FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets - September 30, 1998 and December 31, 1997 1-2
Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30,
1998 and 1997 3
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1998
and 1997 4
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial Condition and Results of Operations 6-10
PART II
OTHER INFORMATION 11
</TABLE>
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1998 1997
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents $ 1,835,000 $ 6,316,000
Accounts receivable, net of allowance for doubtful accounts
of $630,000 and $606,000 in 1998 and 1997, respectively 4,179,000 8,013,000
Refundable income taxes 665,000 --
Prepaid expenses and other current assets 817,000 489,000
Film library, net of accumulated amortization of $3,896,000
and $3,373,000 in 1998 and 1997, respectively 12,335,000 10,236,000
Furniture and equipment, net of accumulated
depreciation of $599,000 and $497,000 in 1998 and 1997,
respectively 560,000 483,000
Goodwill, net of accumulated amortization of $1,189,000
and $1,092,000 in 1998 and 1997, respectively 1,406,000 1,503,000
Trademarks and copyrights, net of accumulated
amortization of $269,000 and $210,000 in 1998 and 1997,
respectively 830,000 590,000
----------- -----------
TOTAL $22,627,000 $27,630,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
(UNAUDITED)
<S> <C> <C>
LIABILITIES:
Accounts payable and accrued expenses $ 2,165,000 $ 2,300,000
Income taxes payable -- 498,000
Deferred income taxes 48,000 3,788,000
Accrued rent and other liabilities 180,000 131,000
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Total liabilities 2,393,000 6,717,000
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STOCKHOLDERS' EQUITY:
Preferred stock $1 par value, 3,000,000 shares authorized, none issued
Common stock, no par value, 10,000,000 shares authorized,
4,187,000 issued and outstanding at September 30, 1998 and
3,573,000 at December 31, 1997 22,843,000 18,153,000
Retained earnings (Accumulated deficit) (2,609,000) 2,760,000
------------ -----------
Total stockholders' equity 20,234,000 20,913,000
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TOTAL $ 22,627,000 $27,630,000
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 5
THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1998 1997 1998 1997
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Filmed entertainment $(2,295,000) $ 5,559,000 $(2,190,000) $ 8,464,000
Merchandising 1,174,000 1,567,000 2,349,000 3,324,000
----------- ----------- ----------- ------------
Net operating revenues (1,121,000) 7,126,000 159,000 11,788,000
----------- ----------- ----------- ------------
OPERATING EXPENSES:
Cost of sales 556,000 1,047,000 993,000 2,744,000
Selling, general and administrative expenses 1,930,000 1,434,000 7,620,000 4,224,000
Amortization of film library, goodwill,
trademarks, copyrights and other 55,000 332,000 678,000 526,000
Depreciation expense 36,000 35,000 102,000 79,000
----------- ----------- ----------- ------------
Total operating expenses 2,577,000 2,848,000 9,393,000 7,573,000
----------- ----------- ----------- ------------
INCOME (LOSS) FROM OPERATIONS (3,698,000) 4,278,000 (9,234,000) 4,215,000
OTHER INCOME 217,000 69,000 323,000 178,000
----------- ----------- ----------- ------------
INCOME (LOSS) BEFORE INCOME TAX
BENEFIT (PROVISION) (3,481,000) 4,347,000 (8,911,000) 4,393,000
INCOME TAX BENEFIT (PROVISION) 1,374,000 (1,796,000) 3,542,000 (1,842,000)
----------- ----------- ----------- ------------
NET INCOME (LOSS) $(2,107,000) $ 2,551,000 $(5,369,000) $ 2,551,000
=========== =========== =========== ============
WEIGHTED AVERAGE SHARES O/S - Basic 4,187,000 3,590,000 4,015,000 3,596,000
=========== =========== =========== ============
WEIGHTED AVERAGE SHARES O/S - Diluted 4,121,000 3,974,000
=========== ============
NET INCOME (LOSS) PER SHARE - Basic $ (0.50) $ 0.71 $ (1.34) $ 0.71
=========== =========== =========== ============
NET INCOME (LOSS) PER SHARE - Diluted $ 0.62 $ 0.64
=========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE> 6
THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(5,369,000) $ 2,551,000
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation 102,000 79,000
Amortization of film library, goodwill, trademarks and copyrights
and other 678,000 526,000
Deferred income taxes (3,740,000) (19,000)
Non-cash reduction in accounts receivable 3,266,000 --
Warrant expense 969,000 35,000
Write-off of leasehold improvements -- 37,000
Changes in operating assets and liabilities:
Investment in film library (2,622,000) (142,000)
Accounts receivable, net 568,000 (3,064,000)
Prepaid expenses and other assets (328,000) (253,000)
Refundable income taxes (665,000) 425,000
Account payable and accrued expenses (135,000) 316,000
Income taxes payable (498,000) 1,842,000
Accrued rent and other liabilities 49,000 41,000
----------- -----------
Net cash (used in) provided by operating activities (7,725,000) 2,374,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (179,000) (338,000)
Investment in trademarks and copyrights (299,000) (65,000)
----------- -----------
Net cash used in investing activities (478,000) (403,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options, net of tax effect 3,722,000 118,000
Repurchase and retirement of common stock -- (357,000)
----------- -----------
Net cash provided by (used in) financing activities 3,722,000 (239,000)
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,481,000) 1,732,000
CASH AND CASH EQUIVALENTS, Beginning of period 6,316,000 6,057,000
----------- -----------
CASH AND CASH EQUIVALENTS, End of period $ 1,835,000 $ 7,789,000
=========== ===========
</TABLE>
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<PAGE> 7
THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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SUMMARY OF ACCOUNTING POLICIES
The condensed consolidated financial statements of The Harvey Entertainment
Company and Subsidiaries (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The accompanying condensed consolidated financial statements should be read in
conjunction with the more detailed consolidated financial statements and related
footnotes included in the Company's Form 10-KSB filed with the Securities and
Exchange Commission on April 15, 1998.
In the opinion of the Company's management, the accompanying unaudited condensed
consolidated financial statements as of September 30, 1998 and for the three and
nine months ended September 30, 1998 and 1997 contain all adjustments, which
include normal recurring accruals, necessary to present fairly the consolidated
financial position of the Company as of September 30, 1998 and the consolidated
results of operations and consolidated cash flows for the nine months ended
September 30, 1998 and 1997.
The results of operations for the interim periods of the Company's fiscal year
are not necessarily indicative of the results to be expected for the entire
year.
* * * * * *
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
On September 21, 1998, the Board of Directors of The Harvey Entertainment
Company announced that it had engaged the investment banking firm of Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") as a financial advisor to the
Company. Pursuant to the engagement, DLJ is assisting the Company in pursuing
strategic alternatives intended to maximize shareholder value. Such alternatives
include, but may not be limited to the sale, merger, consolidation or
recapitalization of the business, securities or assets of the Company. There can
be no assurance as to the outcome, timing or success of the DLJ engagement.
On March 20, 1998, the Company's Board of Directors voted not to renew the
employment agreements of the Company's Chief Executive Officer, Jeffrey A.
Montgomery, and Chief Financial Officer and Executive Vice President, Gregory M.
Yulish which expired on April 17, 1998. On March 27 and March 30, respectively,
Messrs. Yulish and Montgomery resigned from the Board of Directors. The Board of
Directors retained the non-exclusive services of Anthony J. Scotti as the
Company's Interim Chief Executive Officer and Michael S. Hope as the Company's
Interim Chief Financial Officer, effective as of March 23, 1998, through a
management services agreement with Global Media Media Management Group, LLC
("Global Media") for an initial six-month term. In July 1998, the Company's
Board of Directors unanimously approved a new three year business plan. Pursuant
to the plan, the Company contemplated producing up to 12 direct-to-video
products over the next three years, commencing in 1999 and one new television
show per year. Additionally, the Board authorized an executive recruitment
effort to identify and retain a senior management team to succeed its present
interim management. In July 1998, at the request of the Board of Directors,
Global Media agreed to a three-month extension of its management contract to
December 23, 1998. The execution of the Company's plan has been delayed
indefinitely as the Board of Directors, interim management and DLJ explore
possible strategic alternatives.
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Results of Operations - The number of projects generating revenues in 1998 has
been limited and, accordingly, the Company's operating results have been and
will be adversely impacted in contrast to comparable periods in the prior year.
The Company's newly formulated business plan, which would require entering into
long-term video distribution agreements and obtaining a financing package to
fund production activities, has not been implemented and thus any possible
results will not be realized until subsequent periods, if ever. The Company has
finished producing one live-action, direct-to-video featuring the Company's
classic character Baby Huey. The Company has negotiated an agreement with a
major media company for the distribution of the new direct-to-video production
entitled "Baby Huey's Great Easter Adventure" scheduled for release in Spring
1999. Development of all other new products is subject to the results of the
Company's pursuit of certain strategic alternatives. The Company has continued
to develop and exploit its licensing and merchandise rights for the Company's
portfolio of classic characters. In July 1998, as part of the business plan, the
Board of Directors approved the publishing of a new monthly magazine, targeted
for children four to ten years of age, entitled Harvey, the Magazine for
Kids(C). The on-sale date for the December premiere issue is November 17, 1998.
Revenues - Net filmed entertainment revenues were a negative $2,295,000 in the
three months ended September 30, 1998 compared to $5,559,000 in the comparable
period of 1997. The current quarter reflects an adjustment of $2,316,000 to
reduce the Company's estimate of the lifetime profitability of the 1997
direct-to-video title "Casper, A Spirited Beginning." The Company's original
forecast projected worldwide sales of approximately 5 million units whereas
actual sales to date as reported during the quarter to the Company by the
video's distributor approximate 4.5 million, necessitating the adjustment in the
current quarter. Although a second
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<PAGE> 9
direct-to-video title, "Casper Meets Wendy", was released on September 22, 1998,
the Company will not record additional revenues on that title beyond the
non-refundable advance received in 1997 until such time as the actual shipments
indicate that the Company's profit participation will exceed the advance. Filmed
entertainment revenues in the three months ended September 30, 1997 include
revenues from the shipment of "Casper, A Spirited Beginning" and the recognition
of the aforementioned advance on "Casper Meets Wendy." Other filmed
entertainment revenues in both periods were insignificant.
Net merchandising revenues were $1,174,000 and $1,567,000 in the three months
ended September 30, 1998 and 1997, respectively, a decrease of $393,000. The
revenues in 1998 consist of new licenses for the worldwide merchandising of the
Harvey Classic Characters and the licensing revenues from the Company's
direct-to-video features entered into by the Company's in-house licensing
division. Although merchandising licenses are generally granted for a period of
one to three years, a substantial portion of the minimum guaranteed license
revenues are recognized when the license period begins, provided certain
conditions have been met. Due to this accounting treatment, revenue fluctuations
from the Company's merchandising activities will likely recur in the future on a
quarterly and annual basis. The ongoing success of the merchandising program is
in part dependent upon the attractiveness, the ancillary exploitation and future
marketability of the Harvey Classic Characters.
Cost of Sales - Costs of sales relating to filmed entertainment revenues were
$8,000 and $404,000 in 1998 and 1997, respectively. The decrease in cost of
sales is due to a substantial decrease in filmed entertainment activity for the
period.
Merchandising costs were $480,000 and $643,000 in 1998 and 1997, respectively.
The decrease in merchandising costs is due to a decrease in merchandising
activity for the period.
Publishing costs related to the Company's new monthly magazine were $68,000 in
1998.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses (SG&A) were $1,930,000 and $1,434,000 for 1998 and 1997,
respectively, an increase of $496,000. The Company incurred increased salaries,
consulting and other overhead expenses in the current period, including an
expense of $169,000 related to the issuance of options to Global Media during
the three-month period.
Depreciation and Amortization - Depreciation expense was $36,000 and $35,000 in
1998 and 1997, respectively. Amortization of the film library was $4,000 and
$286,000 in 1998 and 1997, respectively. The decrease in amortization is due to
the decrease in revenue derived from the film library, which is being amortized
in accordance with the individual film forecast method. Amortization of
trademarks, copyrights and other was $19,000 in 1998 and $14,000 in 1997.
Amortization of goodwill was $32,000 in both 1998 and 1997.
Other Income - Other income was $217,000 and $69,000 in 1998 and 1997,
respectively. The increase in other income reflects a favorable litigation
settlement in the current period.
Income Taxes - Income tax benefit (provision) was $1,374,000 and $(1,796,000) in
1998 and 1997, respectively. The income tax benefit for 1998 is due to the use
of operating losses generated in 1998 against the deferred income tax
liabilities and prior year operating income.
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<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Revenues - Net filmed entertainment revenues were a negative $2,190,000 in the
nine months ended September 30, 1998 compared to $8,464,000 in the comparable
period of 1997. The current period reflects an adjustment of $2,316,000 to
reduce the Company's estimate of the lifetime profitability of the 1997
direct-to-video title "Casper, A Spirited Beginning." The Company's original
forecast projected worldwide sales of approximately 5 million units whereas
actual sales to date as reported during the quarter to the Company by the
video's distributor approximate 4.5 million, necessitating the adjustment in the
current period. Filmed entertainment revenues in the nine months ended September
30, 1997 include revenues from the shipment of "Casper, A Spirited Beginning"
and the recognition of the aforementioned advance on "Casper Meets Wendy."
Additionally, in the second quarter of 1997 the Company entered into an
agreement with Universal Studios, Inc. ("Universal") to produce and distribute a
motion picture sequel to the original "Casper" movie for theatrical release. The
Company was paid a non-refundable advance for the sequel and, if the sequel is
produced the Company will receive additional non-refundable cash advances. As
part of the Company's agreement with Universal, the Company was also paid a
non-refundable advance against the Company's profit participation from the first
1995 "Casper" movie. There were no such revenues in the 1998 comparable period.
Also contributing to the higher revenues in 1997 were the license fees generated
from the "Casper" animated television show on Fox Kids' Network. In February
1997, the Company and Universal Cartoon Studios received an order from Fox
Kids's Network for an additional 26 thirty minute episodes for a total of 52
animated episodes resulting in license fee revenues of $792,000 in 1997, but
only $63,000 in 1998. Foreign broadcast license revenues from the Harvey Classic
Film Library accounted for $62,000 in 1998 and $293,000 in 1997. The low
revenues were due in part to the expiration of the Company's distribution
agreement with its prior foreign distributor, which expired in November 1997. In
March 1998, the Company hired a foreign distribution consultant based in London
to assist with and oversee foreign sales of the Harvey Classic Film Library.
Other filmed entertainment revenues in 1997 relate to domestic syndication of
the "Richie Rich" show, royalties from Richie Rich cartoon series which is
distributed by Hanna Barbera, a wholly owned subsidiary of Time Warner Inc., and
other miscellaneous sources.
Net merchandising revenues were $2,349,000 and $3,324,000 in the nine months
ended September 30, 1998 and 1997, respectively, a decrease of $975,000. The
revenues in 1998 consist of new licenses for the worldwide merchandising of the
Harvey Classic Characters and the licensing revenues from the Company's
direct-to-video features entered into by the Company's in-house licensing
division. Although merchandising licenses are generally granted for a period of
one to three years, a substantial portion of the minimum guaranteed license
revenues are recognized when the license period begins, provided certain
conditions have been met. Due to this accounting treatment, revenue fluctuations
from the Company's merchandising activities will likely recur in the future on a
quarterly and annual basis. The ongoing success of the merchandising program is
in part dependent upon the attractiveness and future marketability of the Harvey
Classic Characters.
Cost of Sales - Costs of sales relating to filmed entertainment revenues were
$213,000 and $1,281,000 in 1998 and 1997, respectively. The decrease in costs of
sales is due to a decrease in filmed entertainment activity for the period.
Merchandising costs were $712,000 and $1,463,000 in 1998 and 1997, respectively.
The decrease in merchandising costs is due to a decrease in merchandising
activity for the period.
Publishing costs related to the Company's new monthly magazine were $68,000 in
1998.
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<PAGE> 11
Selling, General and Administrative Expenses - Selling, general and
administrative expenses (SG&A) were $7,620,000 and $4,224,000 for 1998 and 1997,
respectively, an increase of $3,396,000. The increase in SG&A in the 1998 period
includes the effect of an approximate $500,000 provision relating to doubtful
accounts from previously recognized guarantees from agents and licensees
operating in the Pacific Rim territories and a $450,000 provision relating to
the Company's prior participation interest in Universal's Harvey-related
merchandising business. Additionally, the Company incurred increased salaries,
consulting and other overhead expenses in 1998 including expenses of $969,000
related to the issuance of options and warrants to Global Media during the
nine-month period and, in June 1999, the extension of the term of certain
warrants granted in a prior year.
Depreciation and Amortization - Depreciation expense was $102,000 and $79,000 in
1998 and 1997, respectively. Amortization of the film library was $523,000 and
$390,000 in 1998 and 1997, respectively. The amortization amount in the current
period includes the write-off of $500,000 of previously capitalized product
development costs due to uncertainties concerning the recoverability of such
costs based on the Company's new business plan. Amortization of trademarks,
copyrights and other was $58,000 in 1998 and $39,000 in 1997. Amortization of
goodwill was $97,000 in both 1998 and 1997.
Other Income - Other income was $323,000 and $178,000 in 1998 and 1997,
respectively. The increase in other income reflects a favorable litigation
settlement in 1998.
Income Taxes - Income tax benefit (provision) was $3,542,000 and $(1,842,000) in
1998 and 1997, respectively. The income tax benefit for 1998 is due to the use
of operating losses generated in 1998 against the deferred income tax
liabilities and prior year operating income, and the tax effect of the stock
options exercised.
LIQUIDITY AND CAPITAL RESOURCES
Net cash (used in) provided by operating activities was $(7,725,000) and
$2,374,000 in 1998 and 1997, respectively. The decrease in cash flows from
operations was primarily due to the operating loss in 1998 and the production of
the live-action, direct-to-video featuring the Company's classic character Baby
Huey.
Net cash used in investing activities was $478,000 and $403,000 in 1998 and
1997, respectively. The increase in cash used in investing activities was
primarily due to more investment by the Company in its trademarks and
copyrights.
Net cash provided by (used in) financing activities was $3,722,000 and
$(239,000) in 1998 and 1997, respectively. The increase is due to the exercise
of employee stock options in 1998 as compared to the Company's repurchase of
common stock in 1997.
The Company has received a commitment from City National Bank for a $2,500,000
revolving credit facility, which will expire on March 31, 1999. Interest on
advances made under the facility accrues at 1% above the prime rate as reported
by the lender. The facility is secured by substantially all of the assets of the
Company. The facility is subject to certain requirements, including, but not
limited to, the maintenance of minimum net worth and also disallows the payment
of dividends. The facility is believed to be sufficient to fund the business
through March 31, 1999 assuming limited operations, but is not sufficient to
implement the business plan approved by the Board of Directors in July 1998.
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<PAGE> 12
OTHER INFORMATION
Item 1 - 1. Franklin Litigation. On September 30, 1994, the Company filed
suit in the Superior Court of the State of California for the
County of Los Angeles against Jeffrey Franklin d/b/a ATI
Enterprises, and Franklin/Waterman Entertainment, Inc., seeking
to recover damages arising from, among other things, wrongful
usurpation of corporate business opportunities. ATI filed a
cross-complaint against the Company for commissions. The Company
filed a related claim against Franklin's business partner Stephen
Waterman in May 1996. The Company was also named in a related
action filed by the defendants' insurers, in which the insurers
sought determinations as to their obligations to provide
insurance coverage for the claims made by the Company against the
defendants. In June 1997, judgment was granted in favor of the
Company in the Franklin action for an amount in excess of
$800,000, and the cross-complaint brought by defendant ATI
against the Company was dismissed. The defendants appealed. In
May 1998, the Company settled all three actions for a payment to
it of $170,000 by the defendants' insurers. That settlement was
subject to the approval of the bankruptcy court. In September
1998, bankruptcy court approval was obtained and dismissals of
those actions have now been entered.
Item 1 - 2. Realty Trust Advisors, Inc. On December 31, 1997, Realty Trust
Advisors, Inc. ("RTA") filed suit against the Company in Los
Angeles Superior Court seeking damages arising out of the alleged
failure of the Company to pay certain commissions. On May 11,
1998 the Company filed a demurrer and a motion to strike the
fraud and punitive damage portions of the first amended
complaint, which were granted. In August 1998, RTA unsuccessfully
sought relief from that order in the court of appeal. On or about
July 9, 1998, the Company filed an answer to the first amended
complaint and a cross-complaint against RTA and its principal,
Anne Keshen, for fraud and declaratory relief. RTA filed a
demurrer and a motion to strike the fraud and punitive damage
portions of the Company's cross-complaint, which was denied.
Cross-defendants filed their answer on or about November 3, 1998.
Trial of this action is scheduled for July 1999.
Items 2 through 4 are omitted as not applicable.
Item 5 - Other Information
None
Item 6 (a)- Exhibit 10.53 Extension to the Management Consulting Agreement
dated July 22, 1998 between the Company and Global Media Media
Management Group, LLC (portions of which have been redacted and
filed under a confidentiality request)
Exhibit 10.54 Agreement dated September 18, 1998 between the
Company and Donaldson, Lufkin & Jenrette Securities Corporation
(portions of which have been redacted and filed under a
confidentiality request)
Item 6 (b)- Reports on Form 8-K
None
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<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE HARVEY ENTERTAINMENT COMPANY
AND SUBSIDIARIES (Registrant)
May 5, 1999 /s/Ronald B. Cushey
----------------------------
Name: Ronald B. Cushey
Title: Chief Financial Officer
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