<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 MAY 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
-------------------------------- ----------------------
(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
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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
May 31, 1996
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash and Cash Equivalents $ 1,911
Trade accounts receivable, less allowance for doubtful accounts of $16,252 5,138
Inventories 385,658
Prepaid expenses and other current assets 26,153
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Total current assets 478,859
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Property and equipment, at cost:
Machinery and equipment 754,018
Leasehold improvements 281,942
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1,035,960
Less accumulated depreciation and amortization (764,145)
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Net property and equipment 271,815
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Other assets 57,967
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Total assets $ 808,642
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note Payable $ 277,475
Accounts payable 454,180
Accrued expenses 239,598
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Total current liabilities 971,253
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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 (14,075,958)
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Net stockholders' equity
(162,611)
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Total liabilities and equity $ 808,642
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</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
HARVEY UNIVERSAL, INC.
Condensed Statements of Operations
(Unaudited)
THREE MONTHS ENDED
--------------------------------
5/31/95 5/31/96
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Net sales $ 214,289 322,815
Cost of sales 128,920 194,755
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Gross profit 85,369 128,060
Operating expenses:
Selling, general and administrative 923,765 435,951
Research and development 90,020 18,535
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Total Operating Expenses 1,013,785 454,486
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Loss from Operations (928,416) (326,426)
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Other income (expense):
Interest income 5,117 207
Interest expense (17,680) (5,724)
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Total Other Income(expense) (12,563) (5,517)
Loss before income tax expense (915,853) (331,943)
Income tax expense -- 0
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Net loss $ (915,853) (331,943)
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Net loss per common share $ (.19) (.07)
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Weighted average common shares outstanding 4,902,174 5,000,000
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See accompanying notes to condensed financial statements.
3
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HARVEY UNIVERSAL, INC.
Condensed Statements of Operations
(Unaudited)
SIX MONTHS ENDED
-------------------------------
5/31/95 5/31/96
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Net sales $ 354,703 544,889
Cost of sales 207,964 309,882
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Gross profit 146,739 235,007
Operating expenses:
Selling, general and administrative 1,679,544 923,070
Research and development 147,947 40,985
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Total Operating Expenses 1,827,491 964,055
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Loss from Operations (1,680,752) (729,048)
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Other income (expense):
Interest income 17,715 350
Interest expense (22,853) (10,277)
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Total Other Income(expense) (5,138) (9,927)
Loss before income tax expense (1,685,890) (331,943)
Income tax expense (28) 800
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Net loss $ (1,685,863) (739,775)
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Net loss per common share $ (.34) (.15)
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Weighted average common shares outstanding 4,902,174 5,000,000
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See accompanying notes to condensed financial statements.
4
<PAGE>
HARVEY UNIVERSAL, INC.
Condensed Statements of Cash Flows
(Unaudited)
SIX MONTHS ENDED
-------------------------------
5/31/95 5/31/96
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Cash flows from operating activities:
Net loss $ (1,685,863) (739,775)
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Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 112,471 70,283
(Increase) decrease in assets:
Trade accounts receivable 3,229 (7,334)
Inventories 120,717 73,139
Prepaids and other assets 102,418 29,504
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (755,581) 167,272
Other liabilities 0
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Total adjustments (416,746) 332,864
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Net cash used by operating activities (2,102,609) (406,911)
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Cash flows from investing activities - purchase
of property and equipment (3,122) 9,491
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Cash flows from financing activities:
Proceeds from notes payable $ (385,000) 277,475
Issuance of Common Stock 3,628,642 0
Repayment of Cap Lease Obligation (21,660) (27,878)
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Net cash provided by financing
activities 3,221,982 249,597
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Net increase (decrease) in cash 1,116,251 (147,823)
Cash at beginning of period 12,436 149,733
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Cash at end of period $ 1,128,687 1,911
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Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 22,853 10,277
Income taxes -- 800
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See accompanying notes to condensed financial statements.
5
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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 had sales to one significant customer, N.S. International Ltd.,
during the three months period ending May 31, 1996 which accounted for 36% of
total sales.
6
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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 $322,815 and a net loss of $331,943 for the
second quarter of fiscal 1996 versus revenues of $214,289 and a loss of $915,853
in the second quarter of 1995.
Revenues by Market
($000's)
Three Months Ended Three Months Ended
May 31, 1995 May 31, 1996
------------------------ ------------------------
Retail $ 61 28% $ 24 7%
Industrial 88 41% 46 14%
Export 66 31% 253 79%
--- ---- --- ---
Total $215 100% $323 100%
Six Months Ended Six Months Ended
May 31, 1995 May 31, 1996
------------------------ -------------------------
Retail $ 125 35% $ 56 10%
Industrial 153 43% 93 17%
Export 77 22% 396 73%
--- ---- --- ---
Total $355 100% $545 100%
Export sales accounted for the sales increase between the second quarter of 1995
and 1996. In addition to shipments to Japan, export sales included shipments to
Taiwan and Thailand.
The Company's retail business 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 increased slightly from 441 in the second quarter of
fiscal 1995 to 43% in the second quarter of 1996. This was due primarily to
under absorbed manufacturing overhead in the second quarter of 1995 due to lower
than planned manufacturing activity.
Selling, general and administrative expenses as well as research and development
expenses decreased in the second quarter of 1996 compared to the prior year.
This was due to further personnel cuts and other expense reductions. The
Company currently has 11 employees versus 25 employees a year ago.
7
<PAGE>
PLAN OF OPERATION
The Company's plan of operations for the next twelve months is to expand its
export business primarily to Japan, develop strategic marketing relationships
with established companies and to focus its domestic marketing efforts on the
industrial markets. The Company expects Japan 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
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.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 1996 the Company had cash of $1,911 and working capital deficit
of $555,137. Liquidity is further impaired as $385,658 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.
8
<PAGE>
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. None
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
-------------------------
Mikio Abe
President, and a duly authorized
signatory
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS <F1>
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 1,911
<SECURITIES> 0
<RECEIVABLES> 81,390
<ALLOWANCES> 16,252
<INVENTORY> 385,658
<CURRENT-ASSETS> 478,859
<PP&E> 1,035,060
<DEPRECIATION> 764,145
<TOTAL-ASSETS> 808,642
<CURRENT-LIABILITIES> 971,253
<BONDS> 0
0
0
<COMMON> 50,000
<OTHER-SE> (212,611)
<TOTAL-LIABILITY-AND-EQUITY> 808,642
<SALES> 322,815
<TOTAL-REVENUES> 323,022
<CGS> 194,755
<TOTAL-COSTS> 578,451
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,095
<INTEREST-EXPENSE> 5,724
<INCOME-PRETAX> (331,943)
<INCOME-TAX> 0
<INCOME-CONTINUING> (331,943)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (331,943)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
<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>
