<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10 - QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1996
Commission File Number 1-12420
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HARVEY UNIVERSAL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 33-0570307
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(State or other jurisdiction of ( I.R.S. Employer
incorporation or organization) Identification Number)
1805 West 208th Street, Torrance, California 90501
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (310) 328 - 9000
NONE
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(Former name, former address and former fiscal year, if changed since last
report)
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
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of April 5, 1996:
Common Stock, $0.01 par value 5,000,000
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Class Number of Shares
Transitional Small Business Disclosure Format: Yes No X
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1
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Harvey Universal, Inc.
Condensed Balance Sheet
August 31, 1996
(Unaudited)
ASSETS
Current assets:
Cash and Cash Equivalents $ 30,531
Trade accounts receivable, less allowance for
doubtful accounts of $17,560 42,964
Inventories 326,150
Prepaid expenses and other current assets 27,772
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Total current assets 427,417
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Property and equipment, at cost:
Machinery and equipment 782,135
Leasehold improvements 281,942
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1,064,077
Less accumulated depreciation and amortization (795,455)
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Net property and equipment 268,622
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Other assets 25,653
Total assets $ 721,692
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note Payable $ 332,057
Accounts payable 191,641
Accrued expenses 60,738
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Total current liabilities 584,436
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Long-Term Liabilities:
Capital Lease Obligations 63,683
Deferred Income 483,333
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Total long-term liabilities 547,016
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Total liabilities 1,131,452
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Stockholders' equity:
Common stock, $.01 par value. Authorized
15,000,000 shares; issued and outstanding
5,000,000 shares 50,000
Additional paid-in capital 13,788,347
Litigation Settlement 75,000
Accumulated deficit (14,323,107)
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2
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Net stockholders' equity $ (409,760)
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Total liabilities and equity 721,692
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See accompanying notes to condensed financial statements.
3
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Harvey Universal, Inc.
Condensed Statements of Operations
(Unaudited)
Three months ended
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8/31/95 8/31/96
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Net sales $ 659,210 95,482
Cost of sales 326,030 105,307
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Gross profit 333,180 (9,825)
Operating expenses:
Selling, general and administrative 1,083,535 214,900
Research and development 67,100 16,662
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Total Operating Expenses 1,150,635 231,562
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Loss from Operations (817,455) (241,387)
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Other income (expense):
Interest income 8,464 408
Interest expense (3,642) (6,467)
Gain on disposal of assets 0 297
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Total Other Income(expense) 4,822 (5,762)
Loss before income tax expense (812,633) (247,149)
Income tax expense 378 0
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Net loss $ (813,011) (247,149)
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Net loss per common share $ (.16) (.04)
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Common shares outstanding 5,000,000 5,000,000
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See accompanying notes to condensed financial statements.
4
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Harvey Universal, Inc.
Condensed Statements of Operations
(Unaudited)
Nine Months ended
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8/31/95 8/31/96
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Net sales $ 1,013,913 640,371
Cost of sales 533,994 415,189
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Gross profit 479,919 225,182
Operating expenses:
Selling, general and administrative 2,760,564 1,135,608
Research and development 215,047 57,647
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Total Operating Expenses 2,975,611 1,193,255
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Loss from Operations (2,495,692) (968,073)
Other income (expense):
Interest income 26,179 758
Interest expense (26,496) (16,744)
Loss on Disposal of Assets 2,514 2,065
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Total Other Income(expense) (2,831) (18,051)
Loss before income tax expense (2,498,523) (986,124)
Income tax expense 350 800
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Net loss $(2,498,873) (986,924)
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Net loss per common share $ (.49) (.19)
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Weighted average common shares outstanding 5,000,000 5,000,000
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See accompanying notes to condensed financial statements.
5
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Harvey Universal, Inc.
Condensed Statements of Cash Flows
(Unaudited)
Nine Months ended
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8/31/95 8/31/96
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Cash flows from operating activities:
Net loss $(2,498,873) (986,923)
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Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 195,769 132,708
(Increase) decrease in assets:
Trade accounts receivable (351,295) 14,840
Inventories 138,477 132,647
Prepaids and other assets 1,816 29,084
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (768,717) (293,093)
Deferred Revenue 0 483,333
Other liabilities 0 0
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Total adjustments (783,950) 499,519
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Net cash used by operating activities (3,282,823) (487,404)
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Cash flows from investing activities - purchase of
property and equipment (12,334) (18,625)
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Cash flows from financing activities:
Proceeds from notes payable $ 0 332,057
Issuance of Common Stock 3,628,641 0
Cap Lease Obligation (31,593) 54,770
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Net cash provided by financing activities 3,597,048 386,827
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Net increase (decrease) in cash 301,891 (119,202)
Cash at beginning of period 12,436 149,733
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Cash at end of period $ 314,327 30,531
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 26,496 16,744
Income taxes 350 800
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See accompanying notes to condensed financial statements.
6
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HARVEY UNIVERSAL, INC.
Notes to Condensed Financial Statements (Unaudited)
(1) BASIS OF PRESENTATION AND GENERAL INFORMATION
The unaudited condensed financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information. In the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation have been
included. The results of operations for interim periods are not necessarily
indicative of results to be achieved for full fiscal years. As contemplated
by the Securities and Exchange Commission under Item 310 of Regulation SB,
the accompanying financial statements and related notes have been condensed
and do not contain certain information that will be included in the company's
annual financial statements and notes thereto. For further information refer
to the financial statements and related notes in Form 10-KSB for the year
ended November 30, 1995.
(2) GOING CONCERN
The Company's losses and cash usage raise substantial doubt about the
entity's ability to continue as a going concern. The Company is currently
attempting to arrange additional equity or debt financing; however, there can
be no assurances that the Company will be able to obtain financing on terms
which are suitable to the Company.
(3) LITIGATION
A securities class action was filed against the Company in October 1994.
While the Company believes the allegations are without merit and the Company
otherwise has valid defenses to the plaintiff's claims, on October 12, 1995
the Company entered into an agreement to settle the class action suit rather
than continue the litigation process. Under the terms of the agreement, the
Company will issue 200,000 shares of common stock to the plaintiff class. In
addition, the Company's insurance carrier will provide a cash payment of
$500,000 to the class. The settlement was approved by the court in January
1996 and became final in February 1996. At the time, the Company's common
stock was trading at 3/8; accordingly, the Company recorded a litigation
settlement expense of $75,000 for the 200,000 shares to be issued. The
Company is presently seeking approval from various jurisdictions with respect
to the issuance of these shares; accordingly, the value of the shares to be
issued has been credited to litigation settlement until such time as they are
issued.
(4) SIGNIFICANT CUSTOMER
The Company entered into an Exclusive Distributorship Agreement and a
Business Collaboration Agreement with Hogy Medical Co., Ltd. in July 1996
whereupon Harvey Universal received $500,000.00 from Hogy Medical. These are
five-year Agreements, therefore the $500,000 has been recorded as deferred
income and is allocated to sales monthly on a straight-line 60 month
schedule, beginning July 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company develops, manufactures and markets environmentally safe
biotechnology, cleaning, metal preparation and specialty products.
RESULTS OF OPERATIONS
The Company generated revenues of $95,482 and a net loss of $247,148 for the
third quarter of fiscal 1996 versus revenues of $659,210 and a loss of $813,010
in the third quarter of 1995.
Revenues by Market
($000's)
Three Months Ended Three Months Ended
August 31, 1995 August 31, 1996
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Retail $ 47 07% $ 5 05%
Industrial 109 16% 64 68%
Export 503 77% 26 27%
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Total $ 659 100% $ 95 100%
Nine Months Ended Nine Months Ended
August 31, 1995 August 31, 1996
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Retail $ 172 16% $ 62 09%
Industrial 262 25% 156 24%
Export 580 59% 422 65%
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Total $1,014 100% $ 640 100%
Sales declined from 3rd quarter 1995 to 3rd quarter 1996 due to corporate
management restructuring in May/June/July, elimination of unproductive retail
business, discontinuance of low-margin products, and schedule slippage of
some planned international sales events.
Retail sales declined since the Company is no longer pursuing new domestic
retail accounts. The Company is continuing to ship to certain existing
retail accounts. There was a decrease in industrial sales due to lower
promotional spending in that area.
The gross profit margin dropped to (10.3%) in 3nd quarter fiscal 1996 vs
50.5% in 3rd quarter fiscal 1995. This was due to elimination of
unproductive inventory. The effect to Cost of Sales from elimination of
unproductive inventory was $56,396, representing 53% of total Cost of Sales.
Had these transactions not occurred, Gross Profit would have been $46,571 or
48%.
Selling, general and administrative expenses as well as research and
development expenses decreased in the 3rd quarter 1996 compared to 3rd
quarter 1995. This was due to further personnel cuts and other expense
reductions. The Company currently has 11 employees versus 25 employees a
year ago.
8
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PLAN OF OPERATION The Company's plan of operations for the next twelve
months is to continue expansion of its export business in Asia, primarily to
Japan, develop strategic marketing relationships with established companies
and focus its domestic marketing efforts on the industrial markets. To
further penetrate the industrial marketplace, the Company has made some
significant changes in industrial marketing groups to obtain more aggressive
representation. The Company still expects Japan and Asia to represent a
significant portion of 1996 sales. The Company is attempting to expand
distribution of hospital janitorial supplies, general janitorial supplies,
car care products, personal sanitizer, hand protectant and cutting oil
freshener in Japan. The Company is also seeking to expand sales of its
cleaning products in Japan and Asia through Seiko Sangyo and other
importer/distributors.
The Company is pursuing strategic relationships with other companies. The
Company announced the completion of its first strategic alliance in February
1996. Dispense All, Inc. of Tulsa, Oklahoma will market Harvey's products
with their condiment dispensing units as well as marketing Harvey's cleaners
on an exclusive basis to food service distributors in the U.S. and Canada.
The Company has received the first order from Dispense All, Inc. to launch
the program.
LIQUIDITY AND CAPITAL RESOURCES
As of August 31, 1996 the Company had cash of $30,531 and working capital
deficit of $232,019. Liquidity is further impaired as $326,150 of current
assets are represented by inventories.
The Company's losses and cash usage raise substantial doubt about the
entity's ability to continue as a going concern. The Company is currently
attempting to arrange additional equity or debt financing; however, there
can be no assurances that the Company will be able to obtain additional
financing on terms which are suitable to the Company.
9
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Harvey Universal, Inc.
Part II Other Information
ITEM 1. LEGAL PROCEEDINGS. See disclosure in Form 10-KSB for the year ended
November 30, 1995.
ITEM 2. CHANGES IN SECURITIES. None
ITEM 3. DEFAULTS UPON SECURITIES. None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None
ITEM 5. OTHER INFORMATION. Effective September 10, 1996, Mr. Larry Harvey
resigned from the Board of Directors of Harvey Universal, Inc..
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. None
SIGNATURE
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.
HARVEY UNIVERSAL, INC.
By: /s/ Mikio Abe
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Mikio Abe
President, and a duly authorized signatory
By: /s/ Alan L. Walsh
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Alan L. Walsh
Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996<F1>
<PERIOD-START> DEC-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 30,531
<SECURITIES> 0
<RECEIVABLES> 60,524
<ALLOWANCES> 17,560
<INVENTORY> 326,150
<CURRENT-ASSETS> 427,417
<PP&E> 1,064,077
<DEPRECIATION> 795,455
<TOTAL-ASSETS> 721,692
<CURRENT-LIABILITIES> 659,436
<BONDS> 0
0
0
<COMMON> 50,000
<OTHER-SE> (434,760)
<TOTAL-LIABILITY-AND-EQUITY> 721,692
<SALES> 640,371
<TOTAL-REVENUES> 640,371
<CGS> 415,189
<TOTAL-COSTS> 1,081,213
<OTHER-EXPENSES> 527,231
<LOSS-PROVISION> 4,702
<INTEREST-EXPENSE> 16,744
<INCOME-PRETAX> (986,124)
<INCOME-TAX> 800
<INCOME-CONTINUING> (986,924)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (986,924)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
<FN>
<F1>The company's fiscal year consists of 52 weeks and ends on the last day
of November. Quarters are based on three-month periods ending the last day
of February, May, August, and November.
</FN>
</TABLE>
