United States

                       Securities and Exchange Commission

                             Washington, D.C. 20549
                                    Form 10-K

Annual Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934

                   For the fiscal year ended November 1, 2003

Transition Report Under Section 13 or 15(d) of The Securities Exchange Act of
        1934 for the Transition Period from ---------- to ---------.

                           Commission File No. 1-4626

                            Harvey Electronics, Inc.
                            ------------------------
                         (Name of issuer in its charter)

          New York                                      131534671
          --------                                      ---------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                  205 Chubb Avenue, Lyndhurst, New Jersey 07071
-------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (201) 842-0078
                                               --------------

         Securities registered under Section 12(b) of the Exchange Act:

                                      None

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.01 par value
-------------------------------------------------------------------------------
                                (Title of Class)

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

Indicate by checkmark if disclosure of delinquent filers in response to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of the registrant's  knowledge,  in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer as defined
in Exchange Act Rule 12b-2). Yes[ ] No[X]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of January 15, 2004; Common Stock 3,324,525 shares.

As of May 2, 2003, the aggregate market value of the  registrant's  Common Stock
held by non-affiliates computed by reference to the price at which the stock was
sold was  $3,069,539.  The shares of Common  Stock are  currently  traded on the
NASDAQ SmallCap Market under the symbols "HRVE".


<TABLE>
<CAPTION>

                                TABLE OF CONTENTS



PART I
------
<S>           <C>
         Item 1. Business
         Item 2. Properties
         Item 3. Legal Proceedings
         Item 4. Submission of Matters to a Vote of Security Holders

PART II
-------
         Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
         Item 6. Selected Financial Data
         Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
         Item 7A. Quantitative and Qualitative Disclosures About Market Risk
         Item 8. Financial Statements and Supplementary Data
         Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
         Item 9A. Controls and Procedures

PART III
--------

         Item 10. Directors and Executive Officers of the Registrant
         Item 11. Executive Compensation
         Item 12. Security Ownership of Certain Beneficial Owners and Management
         Item 13. Certain Relationships and Related Transactions
         Item 14. Principal Accounting Fees and Services

PART IV
-------
         Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K


SIGNATURES
----------

EXHIBIT INDEX
-------------
         Ex-23 Consent of BDO Seidman, LLP
         Ex-23.1 Consent of Ernst and Young, LLP
         Ex-31.1 Certification - President
         Ex-31.2 Certification - CFO
         Ex-32.1 Certification - President
         Ex-32.2 Certification - CFO
</TABLE>


Part I

In  this  Annual  Report  on  Form  10-K,  the  "Company,"   "Harvey",   "Harvey
Electronics", "we," "us," and "our" mean Harvey Electronics, Inc.

This Annual Report on Form 10-K contains  forward-looking  statements  regarding
Harvey's performance,  strategy,  plans, objectives,  expectations,  beliefs and
intentions.  The actual outcome of the events described in these forward-looking
statements  could differ  materially.  This report,  and  especially the section
entitled  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations,"  contains a discussion of some of the factors that could
contribute to those differences.

Item 1. Business.

General

Harvey   Electronics  is  engaged  in  the  retail  sale,   service  and  custom
installation  of high  quality  audio,  video and home  theater  equipment.  The
equipment includes high fidelity components and systems,  digital versatile disc
players ("DVD"),  high definition  television ("HDTV"),  direct view projection,
plasma  flat-screen,  LCD  flat  panel  and  DLP  television  sets,  audio/video
furniture, digital satellite systems, conventional telephones, service contracts
and related  accessories.  The Company has been engaged in this  business in the
New York  Metropolitan  area for  seventy-seven  years.  The  Company  currently
operates nine  locations;  seven Harvey  specialty  retail stores and two Bang &
Olufsen  branded  stores.  There are two Harvey  locations in Manhattan and five
suburban locations in Paramus, New Jersey; Mt. Kisco, in Westchester; Greenwich,
Connecticut;  Greenvale/Roslyn,  on the  north  shore  of  Long  Island,  and in
Eatontown,  New Jersey.  The Bang & Olufsen  branded stores are located in Union
Square at Broadway and 21st Street, in Manhattan, and in Greenwich,  Connecticut
on Greenwich Avenue.

The  Company's   stores  are  designed  to  offer  an  attractive  and  pleasing
environment  and to display its  products  and custom  installation  services in
realistic  home  settings  commonly  known in the  industry as  "lifestyle  home
vignettes."  Sales  personnel are highly  trained  professionals  with extensive
product  knowledge.  This  contrasts  sharply with a more rushed  atmosphere and
lesser-trained personnel of mass merchants.

Products

The Company  offers its  customers a wide  selection  of  high-quality  consumer
audio, video and home theater products,  the distribution of which is limited to
specialty  retailers  (generally  referred  to  in  the  industry  as  "esoteric
brands").  The Company is one of the  country's  largest  retailers of "esoteric
brands"  manufactured  by Bang &  Olufsen,  Crestron,  Lexicon,  Linn,  Marantz,
McIntosh,  NAD, Vienna Acoustics,  Sonus Faber,  Krell,  Loewe, Martin Logan and
Fujitsu.  Many of these  vendors'  products  have been sold by the Company for a
number of years.  The  Company  believes  that it benefits  from strong  working
relationships with these manufacturers. See below, for a discussion about Bang &
Olufsen.

For the fiscal year ended  November 1, 2003,  the Company's  audio product sales
represented  approximately  47% of the  Company's  net sales and  yielded  gross
profit  margins  of  approximately   41%.  The  Company's  video  product  sales
represented  approximately  45% of the  Company's  net sales and  yielded  gross
profit  margins of  approximately  30%. The Company also  provides  installation
services for the products it sells. Custom installation, as commonly referred to
in  the  industry  includes  both  equipment  sales  and  labor  income.  Custom
installation of both equipment and related labor accounted for approximately 55%
of the  Company's  net  sales in  fiscal  2003.  The  labor  portion  of  custom
installation  presently  represents  approximately  8% of net  sales,  while the
equipment  portion  accounted  for 47% of net  sales.  The  Company  also  sells
extended  warranties  on  behalf of third  party  providers.  Sales of  extended
warranties  which  yielded a gross profit  margin in excess of 58%,  represented
approximately 3% of the Company's net sales.

The  following  table shows,  by  percentage,  the  Company's  net product sales
attributable to each of the product categories for the periods indicated.  Audio
components include speakers, subwoofers,  receivers, amplifiers,  preamplifiers,
compact disc players,  cassette decks,  turntables and tuners.  The Company also
sells  digital  satellite  systems  (DSS) which are included in the  VCR/DVD/DSS
category.   Accessories  primarily  include  headphones,  surge  protectors  and
projection screens. The miscellaneous category includes conventional telephones,
answering machines, radios and other portable products.
<TABLE>
<CAPTION>

                                             November 1,    October      October       October       October
Fiscal Year Ended:                              2003        26, 2002     27, 2001      28, 2000      30, 1999
                                       ----------------------------------------------------------------------
<S>                                             <C>            <C>          <C>           <C>           <C>
Audio Components                                29%            31%          39%           43%           49%
Mini Audio Shelf Systems                         4              5            6             7             8
TV and Projectors                               39             39           30            25            18
VCR/DVD/DSS                                      5              6            8             7             7
Furniture                                        5              5            5             5             5
Cable and Wire                                   5              5            5             5             5
Accessories                                      9              7            6             6             6
Extended Warranties                              3              1            -             1             1
Miscellaneous                                    1              1            1             1             1
                                       ----------------------------------------------------------------------
                                               100%           100%         100%          100%          100%
                                               ====           ====         ====          ====          ====
</TABLE>

The  percentage  of sales by each  product  category is affected by, among other
things,  promotional  activities,  consumer  preferences,  store  displays,  the
development of new products and  elimination  or reduction of existing  products
and, thus, a current sales mix may not be indicative of the future sales mix.

The Company  believes  that it is well  positioned  to benefit from  advances in
technologies because new technologies tend to be expensive when first introduced
and the Company's  target  customers  desire and can afford such  products.  New
technologies,  such  as  HDTV,  plasma  flat-screen,  LCD  flat  panel  and  DLP
televisions were recently  introduced.  The plasma flat-screen or LCD flat panel
television allows a small or large screen television to be only four inches wide
from front to back. This allows the set to be far less obtrusive and more easily
integratable  into  the  home.  High  definition  television  has  significantly
improved picture quality.

The Company  intends to  continue  its recent  emphasis  on custom  installation
(representing  55% of net sales in fiscal 2003),  which can extend from a single
room  audio/video  system to an entire  house with a combined  selling  price of
installation,  labor and product from about $5,000 to in excess of $100,000. The
Company believes custom installation provides the opportunity to bundle products
and increase  margins.  In fiscal 2004,  the Company will continue to expand its
merchandising  efforts of complete movie theaters in the home,  in-home lighting
systems  and  distributed  in-home  cabling  for  the  integration  of  computer
networks,  entertainment  systems and other related  services.  The Company will
continue  to  showcase  the  lifestyle  benefits  of plasma and LCD  televisions
throughout the home.

Based on customers'  desires,  custom  installation  projects  frequently expand
on-site.  A single  room home  theater,  for  example,  during the course of the
installation can grow into a multi-room system with increased margins.

Offering custom  installation  affords the Company a unique selling  opportunity
because  it may not be  available  at mass  merchants  and can  generate  repeat
customers and customer  referrals.  Due to the  complexity  of the  installation
provided by the Company,  customers generally remain with the Company, providing
the  opportunity to sell upgrades to existing  customers.  We believe the recent
introduction  of digital  video  products,  network  cabling,  in-home  lighting
systems,   as  well  as  other  emerging   technologies,   present   significant
opportunities for such upgrades.

Operations

Supplies, Purchasing and Distribution

The Company purchases its products from approximately eighty manufacturers,  ten
of which  accounted for  approximately  61% of the  Company's  purchases for the
fiscal year ended November 1, 2003. These ten  manufacturers are Bang & Olufsen,
Boston  Acoustics,  Fujitsu,  Marantz,  Monster  Cable,  Pioneer  Elite,  Runco,
Samsung, Sharp and Sony. Fujitsu and Sony each accounted for more than ten (10%)
percent of the Company's  purchases for the fiscal year ended  November 1, 2003,
and Bang & Olufsen, Marantz, Samsung and Sharp each accounted for more than five
(5%) percent of purchases for such period.

The  Company  has  entered  into dealer  agreements  with  primarily  all of its
vendors.  Under each dealer  agreement,  the Company is  authorized  to sell the
manufacturer's  products from specified retail locations to retail customers and
cannot sell the  products by telephone  or mail order.  Each  agreement is for a
term of a year or two, subject to renewal or extension.

The Company believes that  competitive  sources of supply would be available for
many of the  Company's  products  if a  current  vendor  ceased to supply to the
Company.  However,  a loss of a major  source of supply of limited  distribution
products could have an adverse impact on the Company.

Bang & Olufsen ("B&O") products have been sold by the Company since 1980. As B&O
focuses on developing  B&O licensed  stores  ("Branded  Stores")  throughout the
world, its products are available only in Branded Stores.

The Company opened its first B&O Branded Store in the Union Square area of lower
Manhattan  in July 1999.  In October  2000,  the  Company  opened its second B&O
Branded Store in Greenwich, Connecticut.

These  Branded  Stores  sell  highly  differentiated  Bang &  Olufsen  products,
including uniquely designed audio systems, speakers, telephones,  headphones and
accessories.  The stores  also sell video  products  including  LCD  projectors,
HDTV's,  DVD players,  plasma  flat-screen and LCD flat panel  televisions,  A/V
furniture  and   accessories.   The  store  also  offers   professional   custom
installation of multi-room audio and home theater systems.

Due to the  Company's  strong  relationships  with many of its suppliers and its
volume of  purchases,  the Company  has also been able to obtain  manufacturers'
rebates based on volume buying levels. On occasion, the Company has been able to
negotiate   favorable  terms,   such  as  extended  payment  terms,   additional
cooperative  advertising  contributions or lower prices, on large purchases.  In
addition  to being a member of a  consumer  electronics  industry  buying  group
called Home Theater  Specialists of America (HTSA), the Company is also a member
of Professional Audio Retailers Association (PARA) and Custom Electronics Design
Installation  Association  (CEDIA),  both of  which  provide  the  Company  with
additional training in sales and technology.

Purchases are received at the Company's 11,800 square foot warehouse  located in
Fairfield, New Jersey. Merchandise is distributed to the Company's retail stores
at least  twice a week (and more  frequently,  if needed),  using the  Company's
employees and transportation.

The Company's  management  information  system tracks  current  levels of sales,
inventory,  purchasing and other key  information  and provides  management with
information which facilitates  merchandising,  pricing, sales management and the
management of warehouse and store inventories. This system enables management to
review and analyze the  performance of each of its stores and sales personnel on
a periodic  basis.  The central  purchasing  department of the Company  monitors
current  sales and  inventory at the stores on a daily basis.  In addition,  the
Company  currently  conducts a physical  inventory  two times a year and between
such physical inventories it conducts monthly and daily cycle counts on selected
types of inventory.  The  purchasing  department  also  establishes  appropriate
levels of  inventory  at each  store and  controls  the  replenishment  of store
inventory based on the current delivery or replenishment schedule.

The Company  historically  has not had material losses of inventory and does not
experience material losses due to cost and market fluctuations,  overstocking or
technology.  The  Company  maintains  specific  and general  inventory  reserves
aggregating  $130,000,  $130,000 and $105,000,  for fiscal years 2003,  2002 and
2001, respectively. The Company's inventory turnover for fiscal years 2003, 2002
and 2001 was approximately 3.4 times for all years.

Sales and Store Operations

Retail sales are primarily made for cash or by major credit cards.  Revenues are
recorded by the Company  when the product or service is delivered or rendered to
customers.  Customer  deposits are recorded as liabilities  until the product is
delivered,  at which time a sale is recorded and the  liability for the customer
deposit is relieved.

In  addition,  customers  who qualify can obtain  longer term  financing  with a
Harvey credit card,  which the Company  makes  available to its  customers.  The
Harvey  credit  cards  are  issued  by  two  unrelated  finance  companies.  All
transactions  with these unrelated finance companies are without recourse to the
Company. The Company also periodically,  as part of its promotional  activities,
offers manufacturer sponsored financing to its customers.

Each store is operated  by a store  manager and a senior  sales  manager.  Store
managers  report to a Vice  President of  Operations  who oversees all sales and
store  operations,  and who is further  responsible  for sales  training and the
hiring of all retail  employees.  Every  Company  store has in-home  audio/video
specialists who will survey the job site at a customer's home, design the custom
installation and provide a cost estimate.  Each store independently services its
custom  installations  through  a project  manager  and  experienced  installers
employed at the store. The Company's stores are aided by the Company's  Director
of Custom  Installation  for more  difficult  and technical  projects.  The Vice
President of Merchandising  and President of the Company determine what products
will be  demonstrated  and presented at each store.  All stores are staffed with
professionally trained salespeople and warehouse personnel. Salespeople are paid
a base salary plus commission based on gross margins.

All stores have an on-line point of sale computer system which enables the store
managers and corporate  headquarters to track sales, margins,  inventory levels,
customer deposits,  back orders,  merchandise on loan to customers,  salesperson
performance and customer histories. Store managers perform sales audit functions
before  reporting  daily  results to the sales audit group in the main office in
Lyndhurst, New Jersey.


Services and Repairs

Products  under  warranty are  delivered  to the  appropriate  manufacturer  for
repair.  Other repairs are sent to the  manufacturers  or an independent  repair
company. Revenues from non-warranty services are not material.

The Company offers an extended  warranty  contract for most of the audio,  video
and other merchandise it sells,  which provides coverage beyond the manufacturer
warranty  period.  Extended  warranties  are provided by an unrelated  insurance
company on a non-recourse basis to the Company.  The Company collects the retail
sales price of the extended  warranty  contract  from  customers  and remits the
customer  information  and the cost of the  contract to the  insurance  company.
Sales of extended warranty contracts have increased in fiscal 2003 and represent
approximately 3% of the Company's net sales.  The warranty  obligation is solely
the  responsibility  of the  insurance  company.  See  notes  to  the  financial
statements for additional  information on warranty sales and the presentation of
such sales in the Company's Statements of Operations.

Competition

The Company competes in the New York Metropolitan area with mass merchants, mail
order houses,  discount stores and numerous other consumer electronics specialty
stores.  The retail  electronics  industry is dominated by large  retailers with
massive,  "big box" retail facilities which aggressively  discount  merchandise.
These  retailers  operate on narrow  profit  margins and high volume,  driven by
aggressive advertising  emphasizing low prices.  Nationwide industry leaders are
Circuit City and Best Buy.  The New York region is  dominated  by Circuit  City,
Best Buy, and local chains including P.C. Richard & Son, J&R Music World and 6th
Avenue Electronics.

Many of the competitors sell a broader range of electronic  products,  including
computers,  camcorders and office equipment,  and many have substantially larger
sales and greater  financial and other  resources than the Company.  The Company
competes  by  positioning   itself  as  a  retailer  of  high  quality   limited
distribution  audio and video  products and, we believe,  more  importantly,  by
offering upscale  sophisticated  custom  installations,  which are not generally
offered by all of the mass merchants.

Very few, if any, of the audio products sold by the Company, other than Bose and
certain Sony products,  radios and other portable products, are available at the
mass  merchants.  Of the major video brands sold by the Company,  generally only
Samsung, Sony and Mitsubishi televisions are sold by the mass merchants. In many
of  these  cases,  the  Company  sells  models  which  are not  sold by the mass
merchants.

The Company seeks to reinforce its  positioning  by displaying  its products and
custom installation  services in customized movie theaters built within the home
and in lifestyle home vignettes in an attractive and pleasing store  environment
and by offering  personalized  service  through  trained sales personnel who are
fully familiar with all of the Company's products.  Additionally, we believe the
Company differentiates itself by offering programming  capabilities that address
complex  technological  integration issues and ultimately give the consumer easy
remote control access to multiple devices.

Internet Website

In fiscal 2000, the Company launched its new website,  www.harveyonline.com,  to
support the continued  growth of its exclusive  consumer  electronics and custom
home theater installation showrooms. The website was designed to extend Harvey's
extraordinary  in-store  experience  onto the  Internet as a vehicle to increase
customer traffic at the Company's  retail  locations.  On-line sales,  which are
insignificant, are available seven days a week, twenty-four hours a day, and are
a secondary goal of the website.  Harvey  customers can order on-line within the
Company's trading area in the metropolitan New York marketplace.

Visitors  to the  website  are able to leave  inquiries,  request  home  theater
systems based on budget and room size,  reserve equipment or schedule an in-home
or in-store  consultation  with a Harvey  professional.  Product  specification,
price and warranty comparisons are also available on the site.

Advertising

The Company believes it has a strong and important brand in its marketplace. The
Company strives to promote its superior products and  sophisticated  services in
its advertising campaign to both men and women. In fiscal 2004, the Company will
continue to expand its efforts in its important  customer  relations  management
program.

Currently,  the  Company  has radio,  direct  mail,  print  advertising  and the
Internet with www.harveyonline.com, the Company's website, to promote its brand.

The Company currently uses large, frequent print advertising, emphasizing image,
products,  and  technology  in the New  York  Times,  New York  Times  Magazine,
Newsday,  Bergen Record,  Greenwich Times, The Journal News,  Asbury Park Press,
and the  Gannett  Suburban  News.  The  Company  also  distributes  direct  mail
advertising  several times a year to reach its  significant  customer  database.
Certain direct mail promotions invite customers to seminars on new products,  or
technology,  and  can  be  supported,  in  part,  by  the  manufacturers.  Radio
advertising is currently running on the two most listened to news stations on AM
radio within the Company's market.

All  advertising   consistently  offers  attractive  financing  alternatives  on
purchases on credit without interest for an extended period of time.

The  following  table  shows  the  Company's  gross  advertising  costs  and net
advertising expense as a percentage of net sales for the periods presented.  Net
advertising  expense  represents gross advertising cost less advertising  income
received from the manufacturers.
<TABLE>
<CAPTION>

                                         November 1,     October         October        October        October
   Fiscal Year Ended                        2003         26, 2002        27, 2001       28, 2000       30, 1999
                                    ----------------------------------------------------------------------------

<S>                                      <C>            <C>             <C>            <C>            <C>
   Gross advertising costs               $2,540,000     $2,665,000      $2,864,000     $2,701,000     $1,220,000
   Net advertising expenses                 366,000        632,000       1,206,000        934,000        227,000
   Percentage of net sales                       .9%           1.5%            3.3%           2.7%           1.1%
</TABLE>

Licenses and Intellectual Properties

The Company owns four registered service marks. "HARVEY  ELECTRONICS," issued in
June 1982, and "Harvey", issued March 7, 1989 are currently used by the Company.
"Not Your Ordinary  Electronics  Store",  issued in July 2002 and "The Temple of
Home  Theater",  issued May 13,  1997 are not used by the  Company.  The Company
believes that the service marks HARVEY  ELECTRONICS and HARVEY have  significant
value and are important in marketing the Company's products and services.

Employees

As of  November  1, 2003,  the  Company  employed  approximately  147  full-time
employees  of  which  17  were  management  personnel,  13  were  administrative
personnel, 57 were salespeople, 18 were warehouse workers and 42 were engaged in
custom installation.

Of the salespeople,  warehouse  workers,  and installation  staff, 97 people are
covered by a collective  bargaining  agreement  with the Company,  which expires
August 1, 2004.  The Company has never  experienced a work stoppage and believes
that its relationships with its employees and the union are satisfactory.

Item 2. Properties

All of the  premises  the Company  presently  occupies  are  leased.  Management
believes that the Company's facilities are adequate and suitable for its present
business.  The Company believes that adequate locations are available for future
expansion.

The  Company  leases  approximately  3,900  square  feet  at 205  Chubb  Avenue,
Lyndhurst,  New  Jersey,  which  the  Company  uses as its  corporate  office at
approximately  $40,000 per year,  including other occupancy  costs.  This office
space is under lease  through  January  2006.  The Company also leases an 11,800
square foot  warehouse in Fairfield,  New Jersey at  approximately  $132,000 per
year,  including  other  occupancy  costs,  pursuant  to a lease  which  expires
November 2005.



The Company leases the following retail premises:
<TABLE>
<CAPTION>

                                          Expiration
                                           Date of
                                           Current           Renewal         Approximate
                Location                 Annual Lease        Options           Footage
  ------------------------------------- ----------------- --------------- -----------------

<S>      <C>                               <C>                 <C>              <C>
  2 West 45th Street                       6/30/2005           None             7,500
  New York, NY

  556 Route 17 North                       6/30/2015           None             7,000
  Paramus, NJ

  888 Broadway                            12/31/2006           None             4,000
  at 19th St.
  New York, NY
  (within ABC Carpet & Home)

  19 West Putnam Ave.                      9/30/2006         5 years            5,300
  Greenwich, CT

  44 Glen Cove Road                        8/15/2008           None             4,600
  Greenvale, NY

  115 Main St.                             8/31/2008           None             3,500
  Mt. Kisco, NY

  927 Broadway                            12/31/2005         5 years            1,500
  New York, NY
  (Bang & Olufsen Branded Store)

  86 Greenwich Ave.                        6/30/2005         5 years            1,500
  Greenwich, CT
  (Bang & Olufsen Branded Store)

  57 Route 36 West                         1/01/2011         10 years           6,500
  Eatontown, NJ
</TABLE>


Item 3. Legal Proceedings.

Except as set forth herein,  the Company  believes that it is not a party to any
material  asserted  legal  proceedings  other than those arising in the ordinary
course of business and which are most likely fully covered by insurance  (except
for deductible amounts).  The Company maintains general liability and commercial
insurance in amounts believed to be adequate. However, there can be no assurance
that such amounts of insurance  will fully cover claims made against the Company
in the future.

In January 2004,  the Company  agreed to satisfy  certain long  outstanding  and
disputed tax claims  ($52,000)  under an amnesty  program offered by the City of
New York. The tax claims related to a prior subsidiary for fiscal years 1987 and
1988.  The Company  satisfied  the claim,  in full,  paying  $90,000  (including
interest),  under the amnesty program.  The Company recorded $50,000 to Selling,
General and  Administrative  expenses in fiscal  2003  relating to this  matter.
Prior to the settlement of this matter,  the Company had recorded a liability of
$40,000 relating to this claim.

In July 2003,  the Company  received a notice and  information  request from the
Pennsylvania Department of Environmental Protection ("PADEP"). The notice stated
that  PADEP   considers  the  Company  a  potentially   responsible   party  for
contamination  related to a septic  drain  field  located  at a former  Chem Fab
Corporation ("Chem Fab") site in Doylestown, Pennsylvania.

PADEP's  notice  stated that if Chem Fab was  previously  owned by Harvey Radio,
Inc.  ("Harvey Radio") and if the Company was a successor to Harvey Radio,  then
the Company could be, in part,  responsible for any environmental  investigation
or clean up actions necessary at this site.

Harvey Radio was the  predecessor of The Harvey Group,  Inc.  ("Harvey  Group"),
which filed for relief under Chapter 11 of the United States  Bankruptcy Code in
August 1995. The Company is the surviving  retail  business of the Harvey Group,
which emerged from  bankruptcy  in December  1996.  Chem Fab was a  wholly-owned
subsidiary of Harvey Radio as of September  1967.  The capital stock of Chem Fab
(a then wholly-owned  subsidiary of Harvey Group) was sold by the Company to the
Boarhead  Corporation in January 1978. The  disposition of Chem Fab was prior in
time to the Company's bankruptcy petition date of August 3, 1995.

On August 29, 2003, the Company sent its response letter to PADEP. The Company's
response  stated  that any action by PADEP to recover any money from the Company
relating to any environmental investigation or cleanup related to Chem Fab is in
violation of the injunctions  imposed by virtue of the Company's 1995 Bankruptcy
proceeding. The response letter to PADEP specifically referred to two cases with
respect to  entities  subject  to a  discharge  in  bankruptcy  by the  Southern
District of New York and the Second  Circuit  Court of Appeals.  These cases may
support the Company's position enjoining any further action against the Company.

The Company believes PADEP's claim, even absent the bankruptcy injunction, would
be improper  against the Company,  as Harvey Group was a shareholder of Chem Fab
and Chem Fab's capital stock was sold in 1978, as previously stated.

The Company  advised PADEP that any further action to pursue a claim against the
Company would result in the Company  bringing a motion to reopen its  bankruptcy
case, solely to address the PADEP claim and further,  the Company would commence
contempt proceedings against PADEP. The Company is awaiting PADEP's response.

The Company has also retained  special  Pennsylvania  environmental  counsel for
advice with respect to PADEP's  request for  information  and other matters with
respect to the claim.

Furthermore, the number of other parties that may be responsible,  their ability
to share in the cost of a clean up and whether the  Company's  existing or prior
insurance  policies provide coverage for this matter is not known. At this time,
it is impossible for the Company to determine the outcome or cost to the Company
of this matter.

Item 4. Submission of Matters to a Vote of Security Holders.

None

Part II

Item 5. Market for Registrants Common Equity and Related Stockholder Matters.

The  Company's  Common Stock is traded on the NASDAQ  SmallCap  Market under the
symbols  "HRVE".  The Company's  warrants to purchase  Common Stock,  previously
traded under the symbol "HRVEW", expired March 30, 2003.

The outstanding shares of Common Stock are currently held by approximately 1,600
shareholders of record,  and the Preferred Stock by four holders of record.  The
transfer  agent and  registrar  for the Common Stock is  Registrar  and Transfer
Company, 10 Commerce Drive, Cranford, New Jersey 07016.


The following table indicates the quarterly high and low stock prices for fiscal
years 2003 and 2002:

                                        High              Low
                                  ----------------- ----------------
Fiscal Year 2003
----------------
February 1, 2003                      $1.30              $.81
May 3, 2003                            1.15               .86
August 2, 2003                         1.16               .80
November 1, 2003                       1.10               .80
Fiscal Year 2002
----------------
January 26, 2002                       1.95               .65
April 27, 2002                         1.65              1.10
July 27, 2002                          1.59               .71
October 26, 2002                       1.10               .65

The Company has paid no  dividends  on its Common  Stock for the last two years.
The Company's  lender restricts the payment of dividends on the Company's Common
Stock.  The  Company  does not expect to pay  dividends  on Common  Stock in the
future.

On October 9, 2003,  the  Company  received  notice  from NASDAQ that its Common
Stock  failed to  maintain  a minimum  bid price of $1.00 over the  previous  30
consecutive  trading days as required by The Nasdaq SmallCap Market set forth in
NASDAQ  Small  Cap  Market  Marketplace  Rule  4310(c)(4)(the  "Rule")  and that
pursuant to the Rule, the Company has until April 6, 2004 to regain  compliance.
In the event that at anytime before April 6, 2004 the bid price of the Company's
common stock closes at $1.00 per share or more for a minimum of ten  consecutive
trading  days,  NASDAQ staff will notify the Company in writing that the Company
complies  with the Rule. If the Company does not meet this  requirement  and the
Company's  Common Stock is delisted from the NASDAQ  SmallCap  Market,  it could
further have an adverse effect on the Company's stock price.

Description of Securities

The total authorized  capital stock of the Company consists of 10,000,000 shares
of Common Stock with a par value of $0.01 per share ("Common Stock"), and 10,000
shares of 8.5% Cumulative Convertible Preferred Stock with a par value of $1,000
per share. The following descriptions contain all material terms and features of
the  securities of the Company and are qualified in all respects by reference to
the Company's  Certificate of Incorporation  and Amended and Restated By-Laws of
the Company, copies of which are filed as exhibits.

Common Stock

The Company is authorized to issue 10,000,000  shares of Common Stock with a par
value of  $0.01  per  share.  As of  January  15,  2004,  3,324,525  shares  are
outstanding and held by approximately 1,600 shareholders of record.

The holders of Common Stock are entitled to one vote per share on all matters to
be voted on by shareholders.  There is no cumulative  voting with respect to the
election  of  directors,  with the result  that  holders of more than 50% of the
shares voted for the election of directors can elect all of the  directors.  The
holders of Common  Stock are  entitled  to  receive  dividends  when,  as and if
declared by the Board of Directors from sources legally available therefore.  In
the event of  liquidation,  dissolution  or winding up of the  Company,  whether
voluntary or  involuntary,  and after  payment in full of the amount  payable in
respect of the Preferred Stock, the holders of Common Stock are entitled, to the
exclusion of the holders of the Preferred  Stock, to share ratably in the assets
of the Company  available  for  distribution  to  stockholders  after payment of
liabilities  and  after  provision  for each  class  of  stock,  if any,  having
preference  over the Common  Stock.  Holders of Common Stock have no  preemptive
rights.  All  outstanding  shares  are,  and all shares to be sold and issued as
contemplated  hereby,  will be fully paid and non-assessable and legally issued.
The Board of Directors is authorized to issue additional  shares of Common Stock
within the limits  authorized by the Company's  charter and without  shareholder
action.

Preferred Stock

The Company's  Certificate  of  Incorporation  authorizes the issuance of 10,000
shares of 8.5% Cumulative Convertible Preferred Stock ("Preferred Stock") with a
par value of $1,000 per share.  As of January 15, 2004,  827 shares of Preferred
Stock were issued and outstanding and were held by four holders of record.

The Preferred Stock may be issued from time-to-time without shareholder approval
in one or more  classes  or  series.  A  holder  of the  Preferred  Stock is not
entitled to vote except as required by law.

Dividends  on the  Preferred  Stock  are  cumulative  from  the day of  original
issuance, whether or not earned or declared. In the event the Board of Directors
declares  dividends  to be paid  on the  Preferred  Stock,  the  holders  of the
Preferred Stock will be entitled to receive semiannual  dividends at the rate of
eighty-five  ($85) dollars per share payable in cash on the last business day of
June and  December in each year.  Total  Preferred  Stock  dividends of $70,295,
$74,151  and  $107,603   were  paid  in  fiscal  years  2003,   2002  and  2001,
respectively.  In addition, no dividend shall be paid, or declared, or set apart
for payment  upon,  and no other  distribution  shall at any time be declared or
made in respect of, any shares of Common  Stock,  other than a dividend  payable
solely in, or a distribution of, Common Stock, unless full cumulative  dividends
of the Preferred  Stock for all past  dividend  periods and for the then current
dividend  period have been paid or have been declared and a sum  sufficient  for
the payment thereof has been set apart.

The Preferred Stock shall be redeemable, at the Company's option, in whole or in
part,  upon payment in cash of the Redemption  Price in respect of the shares so
redeemed.  The "Redemption Price" per share shall be equal to the sum of (i) One
Thousand  and 00/100  ($1,000.00)  Dollars  and (ii) all  dividends  accrued and
unpaid  on such  shares  to the  date of  redemption.  If less  than  all of the
outstanding  Preferred  Stock is to be redeemed,  the redemption will be in such
amount and by such method (which need not be by lot or pro rata), and subject to
such other  provisions,  as may from time to time be  determined by the Board of
Directors.

In the event of liquidation,  dissolution or winding-up of the Company,  whether
voluntary or  involuntary,  resulting in any  distribution  of its assets to its
shareholders,  the holders of the Preferred Stock  outstanding shall be entitled
to receive in respect of each such share an amount  which  shall be equal to the
Redemption  Price, and no more, before any payment or distribution of the assets
of the Company is made to or set apart for the holders of Common Stock.

Commencing  January 1, 2001,  the  conversion  price of the Company's  Preferred
Stock was $1.2333 and thus  convertible  into  670,559  shares of Common  Stock,
(calculated  from the closing bid price of the Common  Stock over the 45 trading
days preceding  January 1, 2001).  875 shares of Preferred Stock were originally
issued by the Company. In June 2002, 48 shares of Preferred Stock were converted
to 38,920 shares of the Company's Common Stock by a preferred shareholder.

If at any time prior to the  exercise  of the  conversion  rights  afforded  the
holders of the Preferred  Stock, the Preferred Stock is redeemed by the Company,
in whole or in part,  then the  conversion  right shall be deemed  canceled with
respect to such redeemed stock, as of the date of such redemption.

In case of any  capital  reorganization  or any  reclassification  of the Common
Stock,  or in case of the  consolidation  or merger of the Company  with or into
another corporation, or the conveyance of all or substantially all of the assets
of the Company to another corporation,  each Preferred Share shall thereafter be
convertible  into the number of shares of stock or other  securities or property
to which a holder of the  number of shares  of  Common  Stock  deliverable  upon
conversion  of  such  Preferred   Stock  would  have  been  entitled  upon  such
reorganization, reclassification, consolidation, merger, or conveyance.

Item 6. Selected  Financial  Data  (amounts in  thousands,  except per share and
number of stores data)

Set forth below is selected  financial and  operating  data for each of the five
years ended November 1, 2003.  The selected  statement of operations and balance
sheet data for each of the five years ended  November 1, 2003 have been  derived
from our audited financial statements. Certain items in the fiscal 2002 and 2001
financial data have been  reclassified  to conform to fiscal 2003  presentation.
Amounts relating to fiscal 2000 and 1999 were not material and not reclassified.
The information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
our financial  statements and the notes thereto included  elsewhere in this Form
10K.

<TABLE>
<CAPTION>

                                                   Fiscal Year    Fiscal Year     Fiscal Year     Fiscal Year    Fiscal Year
                                                     Ended           Ended           Ended          Ended           Ended
                                                   November 1,    October 26,     October 27,     October 28,    October 30,
                                                      2003            2002           2001            2000            1999
                                                  ------------------------------------------------------------------------------
<S>                                                 <C>             <C>            <C>          <C>              <C>
Net sales                                           $42,448(3)      $41,326(3)     $36,606(3)   $   34,355       $  21,386
Cost of sales                                        25,141(3)       24,973(3)      22,471(3)       20,813          13,082
                                                  ------------------------------------------------------------------------------
Gross profit                                         17,307          16,353         14,135          13,542           8,304
Gross profit percentage                                  40.8%           39.6%          38.6%           39.4%           38.8%
Interest expense                                        343             359            340             218             179
Selling, general and administrative expenses         16,555          15,806         15,128          12,856           9,043
Other income                                             73             116             83              34              72
                                                  ------------------------------------------------------------------------------
Income (Loss) before income taxes                       482            304          (1,250)            502            (846)
Income taxes                                            195            124               -             185               -
                                                  ------------------------------------------------------------------------------
Net income (loss)                                       287            180          (1,250)            317            (846)

Preferred Stock dividend requirement                    (70)           (72)            (75)            (75)            (74)
                                                  ------------------------------------------------------------------------------
Net income (loss) attributable to
   Common Stock                                        $217           $108         $(1,325)           $242           $(920)
                                                       ====           ====         ========           ====           ======

Net income (loss) per common share
 applicable to common shareholders:
     Basic                                             $.07           $.03           $(.40)           $.07           $(.28)
                                                       ====           ====           ======           ====           ======
     Diluted                                           $.06           $.03           $(.40)           $.07           $(.28)
                                                       ====           ====           ======           ====           ======

Shares used in the calculation of net income
 (loss) per common shares:
     Basic                                        3,324,525      3,297,827       3,282,833       3,282,833       3,282,833
                                                  =========      =========       =========       =========       =========
     Diluted                                      3,866,415      3,907,401       3,282,833       3,346,307       3,282,833
                                                  =========      =========       =========       =========       =========

Stores opened at end of period                            9              9               9               8               7
</TABLE>



Balance Sheet Data:
<TABLE>
<CAPTION>

                                 November         October       October        October       October
                                 1, 2003          26, 2002      27, 2001       28, 2000      30, 1999
                           --------------- ---------------- -------------- -------------- ------------------


Working capital
<S>                            <C>               <C>           <C>           <C>           <C>
   (deficiency)                $   2,950 (2)     $  (600)(1)   $(1,416)(1)   $   747(1)    $    925(1)
Total assets                      12,325          12,151        12,727        11,437          9,745
Long-term liabilities              2,968             156           160           215            251
Total liabilities                  8,380(2)        8,423(2)      9,107(1)      6,590(1)       5,140(1)
Total shareholders'
   equity                          3,945           3,728         3,620         4,847          4,605

<FN>

(1)  It is  important  to note that at the end of fiscal  2002,  2001,  2000 and
     1999,  the Company's  outstanding  balances on its revolving line of credit
     facility ($3,119,000,  3,442,000,  1,068,000 and $1,477,603,  respectively)
     were classified as current liabilities, despite the long-term nature of the
     Company's then outstanding  credit facility.  The presentation as a current
     liability was in accordance with EITF 95-22,  "Balance Sheet Classification
     of Borrowings  Outstanding  under Revolving Credit  Agreements that include
     both a Subjective Acceleration Clause and a Lock-Box Arrangement".  Working
     capital was negatively  impacted by the Company's  significant  increase in
     the revolving line of credit  facility in fiscal 2001,  which was necessary
     to fund retail store expansion and renovation.

(2)  The Company entered into a new $7.5 million credit facility on November 21,
     2003 and the existing  credit  facility was  simultaneously  satisfied  and
     terminated.  As the new credit facility  expires in five years and does not
     include both a subjective  acceleration  clause and a lock box arrangement,
     in  accordance  with  EITF  95-22,  the  Company   classified  the  balance
     outstanding,  at  November  1,  2003  ($2,726,000),  under  the new  credit
     facility as a long-term liability.

(3)  The Company sells extended  warranty  contracts for a third party provider.
     The profit on extended warranty sales is considered  commission at the time
     of sale. As a result,  the net amount earned on these sales recorded in net
     sales,  in accordance  with Emerging Issue Task Force 99-19 ("EITF 99-19"),
     "Reporting Revenue Gross as a Principal Versus Net as an Agent."
</FN>
</TABLE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

The following discussion and analysis contains 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 fiscal  years  ended  November  1, 2003,
October 26, 2002 and October 27, 2001, appearing elsewhere in this Form 10-K.

Results of Operations

Fiscal Year Ended November 1, 2003, as Compared
   to Fiscal Year Ended October 26, 2002

Net Income

The Company's  pre-tax income for the fifty-three  weeks ended November 1, 2003,
increased 58% to $482,000  from  $304,000 for the fifty-two  weeks ended October
26, 2002. Net income for fiscal 2003 increased 59% to $287,000 from $180,000 for
fiscal 2002.

To  supplement  the Company's  consolidated  financial  statements  presented in
accordance with generally accepted accounting  principles ("GAAP"),  the Company
uses non-GAAP  measures of Earnings before  interest,  taxes,  depreciation  and
amortization  ("EBITDA").   The  Company's  Management  reviews  these  non-GAAP
measures  internally  to  evaluate  the  Company's  performance  and  manage its
operations  and believes it is an important  measure in evaluating the Company's
financial performance.  In addition, since the Company has historically provided
non-GAAP results and guidance to the investment community,  the Company believes
that the  inclusion  of non-GAAP  financial  measures  provides  consistent  and
comparable  measures to help  investors  understand  the  Company's  current and
future operating results.

For fiscal 2003 EBITDA  increased to $1,620,000 from $1,580,000 for fiscal 2002.
(EBITDA for fiscal 2003 is  calculated as follows:  pre-tax  income of $482,000,
plus interest of $343,000 and depreciation and amortization of $795,000.  EBITDA
for fiscal 2002 is  calculated  as  follows:  pre-tax  income of  $304,000  plus
interest of $359,000 and depreciation and amortization of $917,000).

Net income for fiscal year 2003 and 2002 was  negatively  impacted by  operating
losses relating to the Company's website of $249,000 and $228,000, respectively.

The  Company's  pre-tax  profit and EBITDA for fiscal  2003 were  reduced by the
results  of its  second  quarter,  which  management  believes  were  negatively
impacted by restrained  consumer  spending  prior to and during the Iraq war, as
well as extreme winter weather conditions in the northeast.

The  Company's net income for fiscal 2003  includes net  advertising  expense of
$366,000 as compared to $632,000  for fiscal  2002.  The  Company's  advertising
presence  has not  materially  diminished  as the  Company's  gross  advertising
expenditures were $2,540,000 in fiscal 2003 as compared to $2,665,000 for fiscal
2002.

The  Company  recorded an income tax  equivalent  provision  of $195,000  (40.6%
effective tax rate) in fiscal 2003 as compared to a provision of $124,000 (40.7%
effective tax rate) in fiscal 2002.


Revenues

For the  year  ended  November  1,  2003,  net  sales  (after  the  effect  of a
reclassification in sales), aggregated $42,448,000, an increase of $1,122,000 or
approximately  2.7% from last year.  It is important to note that the  Company's
fiscal year for 2003  includes  fifty-three  weeks and that the first quarter of
fiscal 2003 included  fourteen  weeks as compared to thirteen weeks for the same
quarter  last year.  Comparable  store sales for fiscal  2003  (again  after the
effect of a reclassification in sales), increased approximately $242,000 or less
than one percent, from fiscal 2002.

The Company believes its positive sales results of fiscal 2003 compare favorably
to other reporting consumer electronics specialty retailers in the industry. The
Company also believes its overall sales results were negatively  impacted by the
Iraq war and extreme weather conditions during the second quarter.

Overall net sales  benefited from the continued  growth of the Company's  newest
Harvey store in Eatontown,  New Jersey which opened in April 2001,  and from the
maturation  of its newest  Bang & Olufsen  branded  store  opened in  Greenwich,
Connecticut in October 2000. Additionally,  the Company experienced strong sales
increases in fiscal 2003, at its Harvey Greenwich,  Connecticut and Paramus, New
Jersey  showrooms.  The Paramus retail showroom had a strong resurgence in sales
during the fourth quarter, after the stores renovation was completed. All of the
Company's  retail  stores had  increases  in their net sales for fiscal  2003 as
compared  to  fiscal  2002,  except  its Bang & Olufsen  branded  store in Union
Square, New York City.  Management has made additional personnel changes in this
store and in fiscal 2004, to-date,  the store has shown significant  improvement
in sales performance.

Finally,  the Company's  store within ABC Carpet and Home,  in lower  Manhattan,
which had experienced declines in sales for the first half of fiscal 2003, had a
strong  rebound in sales for the second  half of the year and has also  recorded
strong sales results in fiscal 2004, to date.

The Company continues to experience  expanding revenues from the unabated strong
demand for its custom installation services.

The Company sells extended  warranty  contracts for a third party provider.  The
profit on extended warranty sales is considered  commission at the time of sale.
As a result,  the net amount  earned on these sales  recorded  in net sales,  in
accordance  with  Emerging  Issue Task Force 99-19  ("EITF  99-19"),  "Reporting
Revenue Gross as a Principal Versus Net as an Agent."

Despite  increased  competition,  customer demand continues to be strong for new
digital  video  products   including   plasma  flat  screen,   LCD  flat  panel,
high-definition  and DLP  televisions  and related  custom  home  installations.
Consumers have embraced  plasma and LCD flat screen  technologies as well as DLP
televisions. Custom installation projects continue to increase and accounted for
approximately 55% of net sales for fiscal 2003, as compared to approximately 51%
of net  sales  for  fiscal  2002.  Custom  installation  sales,  including  both
equipment sales and labor income, increased approximately 11.2% to approximately
$23,776,000 for 2003, as compared to approximately  $21,373,000 for fiscal 2002.
The Company's custom installation services yield higher gross profit margins and
stronger net profitability, as compared to normal retail store sales.

The Company believes it differentiates  itself by offering  sophisticated custom
installation services,  including programming  capabilities that address complex
technological  integration  issues  giving its  customers  easy  remote  control
operations  for a variety of functions.  Management  believes  installations  of
complete  movie  theaters in the home as well as  distributed  audio and network
cabling will continue to attract affluent customers to the Company, which should
continue to benefit  sales,  enhance  gross  margins and improve  overall  store
profitability.

The Company's marketing efforts remained  significant for fiscal 2003, which the
Company  believes,  continued  to drive sales.  These  efforts  included  radio,
newspaper,  direct mail and catalog advertisements,  and the continued promotion
of the  Company's  website,  www.harveyonline.com.  In fiscal 2004,  the Company
anticipates that its advertising expenditures will not be materially reduced and
will be used primarily for radio, print and direct mail advertising. The Company
anticipates that it will continue to promote its brand and image to both men and
women using the new campaign, launched in November 2002, "Harvey.  Extraordinary
in Every Way."

In fiscal 2004,  the Company also will  endeavor to put  additional  efforts and
resources into its important customer relations management initiatives.

Cost and Expenses

Total cost of goods sold for fiscal 2003  increased  $167,000 or .7% from fiscal
2002.  This was primarily due to an increase in sales as noted above,  offset by
an increase in the gross margin.

The gross profit margin for fiscal 2003  increased to 40.8% as compared to 39.6%
for fiscal 2002.

The gross profit margin  increases were achieved  despite a continuing  shift in
business  towards video  products,  which  generally have lower  margins.  Video
product sales for fiscal 2003  accounted for  approximately  45% of net sales as
compared to  approximately  42% of net sales in fiscal  2002,  or an increase of
approximately  7%.  Audio  sales  declined to 47% of net sales in fiscal 2003 as
compared to 50% of net sales in fiscal 2002.  The  reduction in margin from this
shift in product sales was offset by several  factors.  The new digital and flat
screen  video  products  are  sold at  higher  margins  than  analog,  commodity
products.  Further,  the Company has been successful in bundling the sale of new
video products with the sale of higher margin home theater components, including
furniture,  accessories,  cable,  extended  warranties  and custom  installation
labor.

The overall  increase in the gross margin for fiscal 2003 was due primarily to a
10% increase in higher margin custom  installation labor income, a 224% increase
in the sale of extended  warranties  and a 23%  increase in cable  sales,  which
significantly  mitigated  the reduction in the gross margin from the increase in
video sales.

Selling, general and administrative expenses ("SG&A expenses") increased 4.7% or
$749,000 for fiscal 2003, as compared to fiscal 2002.

Comparable, SG&A expenses for fiscal 2003 increased by approximately $527,000 or
3.3% from fiscal 2002.

Fiscal 2003 included fifty-three weeks of SG&A expenses as compared to fifty-two
weeks for fiscal 2002.  Overall and comparable SG&A expenses also increased from
additional payroll and payroll related costs,  insurance  expense,  professional
fees,  occupancy  costs,  truck  expenses  and  various  other   store-operating
expenses,   offset  by  reduced  net  advertising   expense,   depreciation  and
amortization  and  incentive  bonuses.  Additionally,  the  Company  recorded an
expense of $50,000, relating to old outstanding tax claims for fiscal years 1987
and 1988, which was discussed above in Legal Proceedings.

The Company continues to hire additional custom installation personnel and incur
the  necessary  associated  expense  relating  to the  expansion  of its  custom
installation services.

Interest expense for fiscal 2003 decreased 4.4% or $16,000 as compared to fiscal
2002.  The overall  decrease was primarily due to the reduction in the Company's
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 income
and pre-reorganization net operating loss carryforwards. The 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.

For fiscal  years  2003 and 2002,  the income  tax  equivalent  provisions  were
$195,000 and $124,000 respectively, and the reduction of reorganization value in
excess of amounts allocable to identifiable assets also amounted to $195,000 and
$124,000,  respectively.  The income tax equivalent provision did not materially
affect the Company's cash.


Fiscal Year Ended October 26, 2002 as Compared
   to Fiscal Year Ended October 27, 2001

Net Income

The  Company's  pre-tax  income  for the  fiscal  year ended  October  26,  2002
significantly  increased to $304,000 as compared to a pre-tax loss of $1,250,000
for the fiscal year ended October 27, 2001. Net income for fiscal 2002 increased
to $180,000 as compared to a net loss of  $1,250,000  for fiscal 2001.  Earnings
before interest, taxes, depreciation and amortization ("EBITDA") for fiscal 2002
also increased  substantially to approximately  $1,580,000 as compared to EBITDA
of approximately  $79,000 for fiscal 2001. (EBITDA for fiscal 2002 is calculated
as  follows:   pre-tax   income  of  $304,000  plus  interest  of  $359,000  and
depreciation and amortization of $917,000,  EBITDA for fiscal 2001 is calculated
as  follows:   pre-tax  loss  of  $1,250,000   plus  interest  of  $340,000  and
depreciation and amortization of $989,000).

Net  income for fiscal  2002 was  negatively  impacted  by  operating  losses of
approximately  $245,000,  relating  primarily to the Company's  website and to a
lesser extent from the Company's  newest Bang & Olufsen  branded store opened in
Greenwich, Connecticut in October 2000.

The Company's net loss for fiscal 2001 was  materially  impacted by the horrific
events of September 11, 2001,  the total  renovation  of the Company's  flagship
store on 45th  Street in  Manhattan  and the general  slowdown in retail  sales,
experienced  from the latter part of the third  quarter of fiscal  2001,  and by
approximately  $650,000  relating to both  pre-opening  expenses  ($140,000) and
operating losses  ($510,000) from the Company's two new stores and the Company's
website.

The  Company's net income for fiscal 2002  includes net  advertising  expense of
$632,000 as compared to $1,206,000  for fiscal 2001.  The Company's  advertising
presence  has not  materially  diminished  as the  Company's  gross  advertising
expenditures  declined to  $2,665,000  in fiscal 2002 from  $2,864,000  in 2001.
Cooperative  advertising income in fiscal 2001 was negatively  impacted from the
shortfall  in  revenues  in the  Company's  fourth  quarter of fiscal  2001,  as
discussed above.

Results of operations for fiscal years 2002 and 2001 also included  depreciation
and amortization expense of $917,000 and $989,000, respectively.

The  Company  recorded an income tax  equivalent  provision  of $124,000  (40.7%
effective tax rate) in fiscal 2002. The income tax equivalent  provision did not
materially  affect the  Company's  cash. No income tax provision was recorded in
fiscal 2001 as the Company reported a net loss.


Revenues

For the year ended October 26, 2002,  net sales  aggregated  $41,327,000  (after
reclassification  to  conform  to fiscal  2003  presentation),  an  increase  of
$4,720,000, or 12.9% from the prior year. Comparable store sales for fiscal 2002
increased over $2.9 million or 8% from fiscal 2001.  Management  believes that a
portion of the increase in the Company's  overall and comparable store sales, as
compared  to  fiscal  2001,  were  impacted  by the  events of  September  11th,
specifically sales in the fourth quarter of fiscal 2001.

Overall net sales  benefited  significantly  from the new Eatontown,  New Jersey
store opened in April 2001,  which has  exceeded  management's  expectations  in
sales and store profitability.  Additionally, overall and comparable store sales
for fiscal 2002  benefited  from the  rebound in sales of our totally  renovated
flagship  store on 45th Street in Midtown,  Manhattan and the  continued  strong
sales growth of the Company's  Greenvale/Roslyn,  Long Island  store,  the store
located  within ABC Carpet and Home in lower  Manhattan and the Company's Bang &
Olufsen retail showroom in Greenwich, Connecticut. Finally, the Company's Harvey
stores  in  Mount  Kisco,  New  York  and  Greenwich,   Connecticut,  which  had
experienced  declines in sales for the first six months of fiscal 2002, had also
rebounded  in sales in the second  half of fiscal  2002,  as  compared to fiscal
2001,  primarily due to personnel changes and additional  localized  advertising
efforts,  as implemented  by management.  However,  the Company's  Paramus,  New
Jersey  store  experienced  a decline in sales for fiscal  2002 as  compared  to
fiscal 2001.  Management  made  additional  personnel  changes in this store and
completed the construction of a new in-store theater. These changes coupled with
additional planned improvements in fiscal 2003 helped to improve sales.

Customer demand continues to be strong for new digital video products  including
plasma flatscreen, LCD flat panel,  high-definition televisions, DVD and related
custom home  installations.  Consumers have embraced  plasma and LCD flat screen
technologies.  The Company's unit sales of these important  categories have more
than  doubled in fiscal  2002 as compared to fiscal  2001.  Custom  installation
projects  continue to increase and accounted for  approximately 51% of net sales
for fiscal 2002, as compared to approximately  43% of net sales for fiscal 2001.
Custom  installation  sales,  including both  equipment  sales and labor income,
increased  approximately  43% to  $21,373,000  for fiscal  2002,  as compared to
$14,924,000 for fiscal 2001. The Company's  custom  installation  services yield
higher gross  profit  margins and  stronger  net  profitability,  as compared to
normal retail store sales.

We believe the Company  differentiates  itself by offering  sophisticated custom
installation services,  including programming  capabilities that address complex
technological  integration  issues  giving its  customers  easy  remote  control
operation  for a variety of  functions.  Management  believes  installations  of
complete  movie  theaters  in the  home as well as  distributed  audio,  network
cabling and in-home lighting systems continued to attract affluent  customers to
the Company,  and continued to benefit sales, enhance gross margins and improved
overall store profitability.

The Company's  marketing  efforts remained  significant in fiscal 2002, which we
believe  continued to drive sales. In fiscal 2002, these efforts included radio,
newspaper, cable and network television, direct mail and catalog advertisements,
and the continued promotion of the Company's website.  www.harveyonline.com.  In
fiscal 2003, the Company's advertising  expenditures were not materially reduced
and were used  primarily  for radio,  print and  direct  mail  advertising.  The
Company continued to promote its brand and image to both men and women using the
new campaign launched in November 2002, "Harvey. Extraordinary. In Every Way."

Costs and Expenses

Total  cost  of  goods  sold  for  fiscal  2002  increased   $2,502,000   (after
reclassification  to conform to fiscal 2003  presentation)  or 11.1% from fiscal
2001.  This was primarily due to an increase in sales as noted above,  offset by
an increase in the gross margin.

The gross profit margin for fiscal 2002  increased to 39.6% as compared to 38.6%
for fiscal 2001.

The gross profit margin  increases were achieved  despite a continuing  shift in
business  towards video  products,  which  generally have lower  margins.  Video
product sales for fiscal 2002,  accounted for  approximately 42% of net sales as
compared to  approximately  35% of net sales in fiscal  2001,  or an increase of
approximately  20%.  Audio sales  declined to 50% of net sales in fiscal 2002 as
compared to 58% of net sales in fiscal 2001.  The  reduction in margin from this
shift in product sales was offset by several  factors.  The new digital and flat
screen  video  products  are sold at higher  margins  (and higher  prices)  than
analog,  commodity  televisions.  Further,  the Company has been  successful  in
bundling the sale of new video products with the sale of higher margin audio and
home theater components, including furniture,  accessories,  extended warranties
and custom installation  labor. Higher margin,  custom installation labor income
increased by approximately 39% for fiscal 2002 as compared to fiscal 2001, which
significantly  helped to mitigate  the  reduction  in the gross  margin from the
increase in video sales.

Selling, general and administrative expenses ("SG&A expenses") increased 4.5% or
$678,000 for fiscal 2002, as compared to fiscal 2001.

Comparable, SG&A expenses for fiscal 2002 increased by approximately $304,000 or
2% from fiscal 2001.

The overall increase in SG&A expenses was primarily due to the increase in costs
relating to the new  Eatontown,  New Jersey  store,  which opened in April 2001.
Overall and comparable SG&A expenses also increased from additional  payroll and
payroll related costs,  insurance  expense,  occupancy costs,  credit card fees,
incentive bonuses and various other store-operating  expenses, offset by reduced
net advertising expense.

The Company continues to hire additional custom installation personnel and incur
the  necessary  associated  expenses  relating  to the  expansion  of its custom
installation services.

Interest expense for fiscal 2002 increased 5.6% or $19,000 as compared to fiscal
2001. The overall  increase was primarily due to the additional  borrowings from
the  Company's  Credit  Facility  in  fiscal  2001,  which  was used to fund the
Company's retail store expansion,  renovation and website, offset by a reduction
in the overall effective borrowing rate. Additionally,  the increased expense is
due to  amortization  of warrants  issued to the  Company's  lender and from the
amortization  of the commitment fee paid by the Company to its lender,  relating
to the increase and  extension of the Credit  Facility.  Such  amortization  was
recorded  for the entire  year in fiscal  2002 as compared to only ten months in
fiscal 2001.

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 income
and  pre-reorganization  net  operating  loss  carryforwards.  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.

For fiscal  2002,  the income tax  equivalent  provision  was  $124,000  and the
reduction of reorganization value in excess of amounts allocable to identifiable
assets also amounted to $124,000.  The income tax  equivalent  provision did not
affect the Company's  cash. No income tax provision was required for fiscal 2001
due to the Company's reported net loss.

Liquidity and Capital Resources

At November 1, 2003 and October 26, 2002, the Company's  ratio of current assets
to  current  liabilities  was 1.55 and .93,  respectively.  The  improvement  in
working  capital was due primarily to the  refinancing  of the Company's  Credit
Facility which resulted in the Credit  Facility being  reclassified to long-term
liabilities. The Company had negative working capital of $600,000 at October 26,
2002.  However,  it is important to note that at October 26, 2002, the Company's
outstanding  balance on its Credit  Facility  ($3,119,000)  was  classified as a
current  liability,  despite  the  long-term  nature  of  the  Company's  Credit
Facility.  The  presentation  as a current  liability is in accordance with EITF
95-22 (See Note 2 to the Financial Statements for details).

The  improvement  in the current  ratio at November 1, 2003 was also  positively
impacted  by the  increase  in  the  Company's  pre-tax  income.  Other  factors
primarily  improving  working  capital,  included an increase in  inventory  and
accounts  receivable  funded  by the  Company's  credit  facility,  offset by an
increase in customer deposits and income taxes payable.

Net cash  provided from  operations  for fiscal 2003 was $970,000 as compared to
$721,000 for fiscal 2002. The  improvement in cash provided from  operations for
fiscal 2003 was primarily due to additional pre-tax income ($178,000), increased
customer  deposits  and  trade  accounts  payable,   offset  by  a  decrease  in
depreciation and  amortization,  accrued expenses and other current  liabilities
and an increase in inventory.

Net cash used in investing  activities was $483,000 for fiscal 2003, as compared
to net cash used of $234,000 for fiscal 2002. Net cash used for the purchases of
property and equipment and website  enhancements was $470,000 for fiscal 2003 as
compared  to  $237,000  for  fiscal  2002.  Additions  for fiscal  2003  related
primarily to furniture,  fixtures, computer equipment,  website improvements and
leaseholds  relating  to store  theaters  and the  renovation  of the  Company's
Paramus store.

Net cash used in financing  activities was $487,000 for fiscal 2003, as compared
to $499,000 for fiscal 2002.  Financing  activities for fiscal 2003 included net
payments of $394,000,  reducing the Credit  Facility,  preferred stock dividends
paid of $70,000 and principal  payments on capital leases of $22,000.  Financing
activities for fiscal 2002 included net payments of $323,000 reducing the Credit
Facility,  preferred  stock  dividend  payments of $74,000,  payments on capital
leases of $81,000 and note payable payments of $22,000.

On November 21, 2003,  the Company  entered  into a new  five-year  $7.5 million
credit  facility with  Whitehall  Retail  Finance  ("Whitehall"),  a division of
Whitehall Business Credit Corporation, a subsidiary of Connecticut based Webster
Bank.  This new credit  facility  replaced the credit facility with Wells Fargo.
Under the new credit  facility,  the Company can borrow up to $7.5 million based
upon  lending  formulas  calculated  on  eligible  credit card  receivables  and
inventory,  less  certain  reserves,  as defined.  The credit  facility  expires
November 21, 2008.

The interest rate on all borrowings  under the new credit facility is 0.25% over
Webster  Bank's  prime rate (4.25% at November 1, 2003) or LIBOR plus 2.75%,  at
the Company's option.  The Company agreed to pay Whitehall a $25,000  commitment
fee,  payable in two equal  installments  of $12,500,  on November  21, 2003 and
November 21, 2004,  respectively.  Under the credit  facility,  the Company will
also pay Whitehall a reduced  maintenance  fee of $1,000 per month and an unused
line fee based on a formula, as defined in the credit facility.  Simultaneously,
with the closing of the Whitehall  credit  facility,  the Company  satisfied all
outstanding  amounts due to Wells Fargo, in the amount of $2,504,000,  and Wells
Fargo's senior security interest in the Company's assets was terminated.

In connection  with the new credit  facility,  the Company  granted  Whitehall a
senior  security  interest in all of the Company's  assets.  The credit facility
provides  Whitehall with rights of  acceleration  upon the occurrence of certain
customary events of default.  The Company is restricted from paying dividends on
its Common Stock,  retiring or  repurchasing  its Common Stock and entering into
additional indebtedness (as defined).

Pursuant to the new credit  facility,  the Company cannot exceed certain advance
rates on eligible  inventory and must maintain certain levels of earnings before
interest,  taxes,  depreciation and  amortization.  Additionally,  the Company's
capital expenditures cannot exceed a predetermined amount.

The following is a summary of our significant  contractual  cash obligations for
the  periods  indicated  that  existed  as of  November  1, 2003 and is based on
information appearing in the Notes to the Financial Statements:
<TABLE>
<CAPTION>

                          2004        2005-2006     2007-2008     After 2008        Total
--------------------- -------------- ------------- ------------- -------------- ---------------
<S>                     <C>            <C>           <C>           <C>           <C>
Operating leases        $2,337,000     $3,548,000    $1,566,000    $3,115,000    $10,566,000
Credit Facility                  -        -          $2,726,000             -     $2,726,000
--------------------- -------------- ------------- ------------- -------------- ---------------
Total    contractual
cash obligations        $2,337,000     $3,548,000    $4,292,000    $3,115,000    $13,292,000
--------------------- -------------- ------------- ------------- -------------- ---------------
</TABLE>

The  Company  has  authorized  10,000  shares  of  8.5%  Cumulative  Convertible
Preferred Stock  ("Preferred  Stock") with a par value of $1,000 per share.  The
conversion  price of the  Company's  preferred  stock is $1.2333.  875 shares of
Preferred Stock were originally  issued by the Company.  In June 2002, 48 shares
of Preferred Stock were converted to 38,920 shares of the Company's Common Stock
by a preferred  shareholder.  At November 1, 2003, 827 shares of Preferred Stock
were  issued  and  outstanding.  The  Company's  remaining  Preferred  Stock  is
convertible into 670,559 shares of Common Stock.

In fiscal 2004,  the Company plans to enter into a new retail store lease for an
additional  Harvey  showroom in New  Jersey.  If the  Company is  successful  in
locating a suitable location, the Company will finance all necessary leaseholds,
security  deposits,  furniture and fixtures,  pre-opening  costs and  inventory,
expected to  aggregate  between  $1,200,000  -  $1,400,000,  with its new credit
facility.  The new retail store is expected to open at the end of fiscal 2004 or
early in the first quarter of 2005. The Company expects to make  improvements to
certain of its Harvey retail  showrooms,  including the  installation of a movie
theater within one of its stores. Miscellaneous purchases of equipment and other
assets for fiscal 2004 are not expected to be significant.

The  Company  intends to  continue  its  advertising  campaign  in fiscal  2004,
primarily with print, radio and direct mail.

The  Company's  website gives its  customers  access to one of Harvey's  upscale
retail showrooms or offers its customers a private, in-home consultation through
the  convenience  of the Internet.  The  anticipated  costs of  maintaining  and
improving the website are not expected to be material for 2004.

As  previously  noted in Part I, Legal  Proceedings,  in July 2003,  the Company
received a notice and information  request from the  Pennsylvania  Department of
Environmental  Protection ("PADEP").  The notice stated that PADEP considers the
Company a potentially  responsible party for  contamination  related to a septic
drain field in Doylestown,  Pennsylvania.  See Part 1 above and the notes to the
Company's financial statements for details on this matter.

Management  believes that cash on hand, cash flow from operations and funds made
available under the new credit  facility with  Whitehall,  will be sufficient to
meet the  Company's  anticipated  working  capital  needs  for at least the next
twelve-month period.

Seasonality

Our business is subject to seasonal variations. Historically, we have realized a
quarter  of our total  revenue  and a  majority  of our net  income for the year
during the first fiscal quarter.  Due to the importance of the holiday  shopping
season, any factors  negatively  impacting the holiday selling season could have
an adverse  effect on our  revenues  and our ability to  generate a profit.  Our
quarterly results of operations may also fluctuate significantly due to a number
of factors,  including  the timing of new store  openings and  acquisitions  and
unexpected   changes  in  volume-related   rebates  or  changes  in  cooperative
advertising policies from manufacturers.  In addition,  operating results may be
negatively affected by increases in merchandise costs, price changes in response
to competitive  factors and  unfavorable  local,  regional or national  economic
developments that result in reduced consumer spending.

Impact of Inflation

Management does not believe that inflation has had a material  adverse effect on
our results of operations.  However,  we cannot predict accurately the effect of
inflation on future operating results.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations
are based upon our financial  statements  which have been prepared in accordance
with  accounting  principles  generally  accepted  in  the  United  States.  The
preparation of these financial  statements requires management to make estimates
and  judgments  that  affect the  reported  amounts of assets,  liabilities  and
related  disclosure  of  contingent  assets and  liabilities  at the date of the
financial  statements and the reported  amounts for revenues and expenses during
the reporting  period.  On an ongoing  basis,  Management  evaluates  estimates,
including those related to income taxes, inventory allowances, contingencies and
to a lesser extent,  bad debts.  We base our estimates on historical  data, when
available,  experience, and on various other assumptions that are believed to be
reasonable under the circumstances, the combined results of which form the basis
for making  judgments about the carrying  values of assets and liabilities  that
are not readily  apparent  from other  sources.  Actual  results may differ from
these estimates.

Critical Accounting Policies

The  accompanying   financial   statements  were  prepared  in  accordance  with
accounting  principles  generally  accepted  in the  United  States of  America.
Significant  accounting  policies are  discussed in Footnote 1 to the  Financial
Statements,  Item 8.  Inherent in the  application  of many of these  accounting
policies is the need for  management  to make  estimates  and  judgments  in the
determination of certain revenues,  expenses,  assets and liabilities.  As such,
materially  different  financial  results can occur as circumstances  change and
additional  information  becomes known. The policies with the greatest potential
effect on our results of operation and financial position include:


     Revenue Recognition

     For the Company,  net sales and operating revenues include items related to
     normal  business  operations,  including the sale of goods to customers and
     custom installation  revenue.  Retail sales are recorded at the time of the
     sale to the customer.  Custom installation  revenue,  which is comprised of
     both the sale of products and the labor in connection with the installation
     of the  products,  are recorded in accordance  with the  provisions of EITF
     00-21,  "Revenue  Arrangements  with  Multiple  Deliverables".  The revenue
     related  to the sale of the  products  is  recognized  when the  product is
     delivered to the customers.  The revenue related to the labor in connection
     with the  installation  of the  products,  is recorded when the service has
     been performed.

     Inventory

     Inventory is the Company's largest asset class,  comprising over 50% of the
     Company's total assets. The Company's  inventory consists of finished goods
     held for  retail  sale.  Purchase-based  volume  rebates  are  credited  to
     inventory or cost of products sold, as  appropriate.  The Company  assesses
     the market value of its inventory on a regular  basis by  reviewing,  on an
     item-by-item basis, the realizable value of its inventory;  net of specific
     or general lower of cost or market reserves. If it is management's judgment
     that the selling  price of an item must be lowered  below its cost in order
     for it to be sold,  then the  carrying  value of the related  inventory  is
     written down to realizable  value.  A number of factors would be taken into
     consideration in assessing realizable value including the quantity on hand,
     historical sales,  technological  advances,  the existence of a replacement
     product,   and  consumer  demand  and  preferences.   Depending  on  market
     conditions,   the  actual  amount   received  on  sale  could  differ  from
     management's estimate.

     As a  result  we have  reduced  our net  inventory  value  to  reflect  our
     estimated  amount of  inventory  with lower of cost or market  issues.  Our
     inventory  reserve at November 1, 2003 and October 26, 2002 is $130,000 and
     $130,000,  respectively. It is also possible that obsolescence could become
     a significant issue in the future.

     Long-Lived Assets

     Long-lived  assets such as property,  plant and  equipment,  goodwill,  and
     reorganization  value are reviewed for impairment when events or changes in
     circumstances  indicate  the  carrying  value  of  the  assets  may  not be
     recoverable.  We would recognize an impairment  loss when estimated  future
     undiscounted  cash flows  expected  to result from the use of the asset and
     its value upon disposal are less than its carrying amount. If our estimates
     regarding future undiscounted cash flows or useful lives were to change, we
     could be exposed to losses that are material in nature.


     Cash Discounts and Coop Advertising

     We receive cash discounts for timely  payment of  merchandise  invoices and
     recognize  these  amounts in our  statement of operations as a reduction of
     cost of sales.

     We also receive  substantial funds from our suppliers for coop advertising.
     These  funds are used for  advertising  purposes  and the funds  earned are
     recorded  net of  advertising  expenditures,  and are  included in selling,
     general and administrative expenses.

     Accrued expenses

     The Company is  constantly  required to make  estimates of future  payments
     that will be made which  relate to the  current  accounting  period.  These
     estimates range from things such as accrued bonuses to estimates of pending
     litigation claims and income taxes. In establishing  appropriate  accruals,
     management  must make  judgments  regarding the amount of the  disbursement
     that will ultimately be incurred.  In making such  assessments,  management
     uses  historical  experience  as well as any  other  special  circumstances
     surrounding  a particular  item.  The actual  amount paid could differ from
     management's estimate.

Recent Accounting Pronouncements

Prior to fiscal 2003, the Financial  Accounting  Standards Board ("FASB") issued
SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived Assets,"
SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, amendment of FASB
Statement No. 13, and Technical  Corrections," and SFAS No. 146, "Accounting for
Costs  Associated  with Exit or  Disposal  Activities."  The  adoption  of these
standards  in fiscal year 2003 did not have a material  effect on the  Company's
financial position or result of operations.

In July  2003,  the EITF  issued  EITF No.  00-21,  "Revenue  Arrangements  with
Multiple  Deliverables,"  which  provides  guidance  on the timing and method of
revenue  recognition  for sales  arrangements  that include the delivery of more
than one product or  service.  EITF No.  00-21 is  effective  prospectively  for
arrangements  entered into in fiscal periods  beginning after June 15, 2003. The
adoption  of EITF No.  00-21 did not have a  material  effect  on the  Company's
financial position or results of operations.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

The  information  required  by this item is  incorporated  by  reference  to the
Company's financial statements set forth on page F-1.

Item  9.  Changes  in and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure.

The Company changed its independent  public  accounting firm in fiscal 2002 from
Ernst & Young LLP to BDO Seidman,  LLP. There were no disagreements  between the
Company and Ernst & Young LLP.

Item  9A.   Controls  and  Procedures

Under the supervision and with the  participation  of the Company's  Management,
including the President and the Chief Financial Officer, the Company carried out
an evaluation of the effectiveness of the design and operation of the disclosure
controls and procedures, as defined in Rules 13a-15 and 15d-15 of the Securities
Exchange  Act of  1934,  as  amended  (the  "Exchange  Act").  Based  upon  that
evaluation,  the Company's  President and Chief Financial Officer concluded that
the Company's disclosure controls and procedures are effective, as of the end of
the period covered by this Report  (November 1, 2003), in ensuring that material
information  relating to the Company  required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  rules and forms,  including  ensuring that such material
information  is  accumulated  and  communicated  to  the  Company's  Management,
including the Company's President and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.  There were no significant
changes in the Company's internal control over financial  reporting (as required
by the  Exchange  Act) that  occurred  during our last fiscal  quarter that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal controls over financial reporting.


Part III

Item  10.  Directors,   Executive  Officers,   Promoters  and  Control  Persons;
Compliance With Section 16(a) of the Securities Exchange Act.

The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>

              Name                   Age (1)                            Position
--------------------------------- --------------- ----------------------------------------------------
<S>                                     <C>       <C>
Michael E. Recca                        53        Chairman and Director
William F. Kenny, III                   72        Director
Jeffrey A. Wurst                        54        Director
Fredric J. Gruder                       57        Director
Nicholas Marshall                       71        Director
Ira J. Lamel                            56        Director
Franklin C. Karp                        50        President and Director
Joseph J. Calabrese                     44        Executive Vice President, Chief Financial Officer,
                                                    Treasurer, Secretary and Director
Michael A. Beck                         45        Vice President of Operations
Roland W. Hiemer                        42        Vice President Merchandising
<FN>
(1)      As of November 1, 2003.
</FN>
</TABLE>


Michael E. Recca became the Chairman of the Board of Directors of the Company in
November  1996.  Mr.  Recca is also a  member  and the sole  manager  of  Harvey
Acquisition Company,  LLC, which is a principal  shareholder of the Company. Mr.
Recca  was  an  employee  of  Taglich   Brothers,   Inc.,  an  NASD   registered
broker-dealer,  through  December  31,  1998.  Beginning  in  January  2002  and
continuing  through  April  2002,  Mr.  Recca was  self-employed  as a financial
restructuring  consultant,  and in this capacity also  associated with NorthStar
Capital, LLC, a joint venture with Ruskin Moscou Faltischek, P.C., the Company's
corporate counsel.  Currently,  Mr. Recca is a director of Sky Capital Holdings,
LTD, and of several wholly owned  subsidiaries  of Sky Capital  Holdings and the
President  of Sky  Capital,  LLC,  a  wholly  owned  subsidiary  of Sky  Capital
Holdings,  LTD and an NASD  broker-dealer.  Mr.  Recca is also a director of Sky
Venture Capital and Sky Capital Ventures, (companies affiliated with Sky Capital
Holdings, LTD) and several of their wholly or partially owned subsidiaries

Franklin C. Karp began his career in the retail  consumer  electronics  industry
over 25 years ago,  working  then as a salesman  for one of the most  successful
chain operations in the New York metropolitan area. He held various positions in
sales management,  purchasing and operations. In 1990, Mr. Karp joined Harvey as
Merchandise Manager and later as Vice President in charge of merchandising.  Mr.
Karp was appointed President of Harvey in 1996.

Joseph J.  Calabrese,  a  certified  public  accountant,  joined the  Company as
Controller in 1989.  Since 1991,  Mr.  Calabrese  has served as Vice  President,
Chief Financial Officer,  Treasurer and Secretary of the Company.  Mr. Calabrese
was elected  Executive Vice President and a Director of the Company in 1996. Mr.
Calabrese  began  his  career  with  Ernst & Young  LLP in  1981  where  for the
eight-year  period prior to his joining the Company he performed  audit services
with respect to the Company.

Fredric J. Gruder, has been a director since July 1998. Since December 2001, Mr.
Gruder  has been a sole  practitioner  in his own law  firm.  From  July 1999 to
December 2001, Mr. Gruder was of counsel to Dorsey & Whitney LLP. From September
1996  to July  1999,  he was a  partner  in the law  firm  of  Gersten,  Savage,
Kaplowitz & Fredericks,  LLP ("Gersten"),  which represented Thornwater Company,
L.P.  ("Thornwater"),  representative  of  the  Company's  underwriters  in  the
Offering.  From March 1996 through  September 1996, Mr. Gruder was of counsel to
Gersten,  having been a sole practitioner from May 1995 through March 1996. From
March 1992 until March 1996,  Mr.  Gruder  served as vice  president and general
counsel  to  Sbarro,  Inc.,  then a  publicly  traded  corporation  which  owns,
operates,  and franchises  Italian  restaurants.  Prior to this time, Mr. Gruder
practiced  law in New York for over  twenty  years,  specializing  in  corporate
securities and retail real estate.

William F.  Kenny,  III has been a director  of the  Company  since  1975.  From
January 1992 to December  2000,  Mr.  Kenny was a consultant  to Meenan Oil Co.,
Inc. Prior to 1992, Mr. Kenny was the President and Chief  Executive  Officer of
Meenan Oil Co., Inc. Mr. Kenny has also served as a director of the Empire State
Petroleum  Association,  Petroleum Research  Foundation and was the President of
the  East  Coast  Energy  Council.  Mr.  Kenny  was also  the  President  of the
Independent  Fuel Terminal  Operators  Association and the  Metropolitan  Energy
Council.

Jeffrey A. Wurst,  a director  since February 2000, is a Partner at the law firm
of  Ruskin  Moscou  Faltischek,  P.C.  ("Ruskin"),  where he chairs  the  firm's
Financial  Services Group. Mr. Wurst began his legal career with Ruskin in 1987.
Mr. Wurst is experienced in asset based lending,  factoring,  commercial finance
and  bankruptcy  matters.  Mr. Wurst  graduated  from the Jacob D. Fuchsburg Law
Center of Touro  College  in 1987 and  earned  his B.S.  and M.A.  from  Hofstra
University.  Mr. Wurst's law firm has been involved in the legal  representation
of the Company since it reorganized under the bankruptcy laws in 1996.

Nicholas A.  Marshall has been a director of the Company  since May 2003.  Since
1998,  Mr.  Marshall has worked as a consultant  and trustee of a family estate.
From 1983 - 1997,  Mr.  Marshall  served as a director  of the  Greater New York
Savings  Bank and from  1997-1998  he was an  Advisory  Board  member of Astoria
Federal Corporation.  Mr. Marshall has over 37 years of experience in investment
banking and has held senior  executive  positions  in several  asset  management
firms. Mr. Marshall has a BA degree from Yale University and an MBA from Harvard
Business School.

Ira J.  Lamel was  appointed  to the  Company's  Board and  Audit  Committee  in
November  2003. He has been the  Executive  Vice  President and Chief  Financial
Officer and Treasurer of The Hain Celestial  Group,  Inc. since October 1, 2001.
Mr. Lamel,  a certified  public  accountant,  was a partner at Ernst & Young LLP
where he served in various  capacities from June 1973 to September 2001. Ernst &
Young LLP served as the Company's  independent  auditors  until fiscal 2001. Mr.
Lamel  directed all of Ernst & Young's  services to the Company,  including  the
audits of our financial statements, from fiscal 1997 through fiscal 2000.

Michael A. Beck has been Vice President of Operations of the Company since April
1997. From June 1996 until such date he was the Company's Director of Operations
and from October 1995 until April 1996 he served as Director of  Operations  for
Sound City, a consumer  electronics  retailer.  Mr. Beck was a store manager for
the  Company  from  August  1989  until  October  1995.  Mr.  Beck holds a BA in
Psychology from Merrimack College.

Roland W.  Hiemer has been with the  Company  since  1990.  He started  with the
Company as a salesman and advanced to Senior Sales Manager for the Paramus store
in 1991. He was further promoted to Inventory  Control Manager in 1991. In 1997,
he was promoted to Director of  Inventory  Control and in 2001,  Mr.  Hiemer was
promoted to  Merchandise  Manager.  In January 2004,  Mr. Hiemer was promoted to
Vice   President  of   Merchandising.   Mr.   Hiemer  holds  a  BA  in  Business
Administration from Hofstra University.

Committees of the Board of Directors

The Board of  Directors  has an Audit  Committee  and a  Compensation  and Stock
Option Committee.

Audit   Committee.   The  function  of  the  Audit  Committee   includes  making
recommendations  to the Board of Directors with respect to the engagement of the
Company's  independent  auditors  and the  review of the scope and effect of the
audit engagement. The Company's Audit Committee is governed by a written charter
approved by the Board of Directors.  William F. Kenny, III, Jeffrey A. Wurst and
Fredric J. Gruder were members of the Audit Committee at the beginning of fiscal
2003.  Nicholas A.  Marshall  and Ira J. Lamel  replaced  Frederic J. Gruder and
Jeffrey A. Wurst during fiscal 2003.  Ira J. Lamel is the  Financial  Expert and
Chairman of the Audit Committee.

Compensation  and Stock Option  Committee.  The function of the Compensation and
Stock Option Committee is to make  recommendations  to the Board with respect to
the  compensation of management  employees and to administer  plans and programs
relating  to  stock  options,  pension  and  other  retirement  plans,  employee
benefits, incentives, and compensation. Fredric J. Gruder, William F. Kenny, III
and Jeffrey A. Wurst were members of the Compensation and Stock Option Committee
in  fiscal  2003.  Nicholas  A.  Marshall  and Ira J.  Lamel  were  added to the
Compensation and Stock Option Committee during fiscal 2003.

Code of Ethics

The  Company  adopted  a code  of  ethics  applicable  to its  President,  Chief
Financial  Officer,  Controller and other finance  leaders,  which is a "code of
ethics"  as  defined  by  applicable   rules  of  the  Securities  and  Exchange
Commission.  This code of ethics is publicly available at the Company's website.
If the Company makes any amendments to this code of ethics other than technical,
administrative,  or other  non-substantive  amendments,  or grants any  waivers,
including  implicit  waivers,  from a  provision  of this  code of ethics to the
Company's  President,  Chief Financial  Officer or Controller,  the Company will
disclose the nature of the amendment or waiver,  its effective  date and to whom
it  applies  in a report  on Form 8-K filed  with the  Securities  and  Exchange
Commission.

Item 11. Executive Compensation.

The following  table sets forth the cash  compensation  paid by the Company,  as
well as any other compensation paid to or earned by the Chairman of the Company,
the  President of the Company and those  executive  officers  compensated  at or
greater than  $100,000 for  services  rendered to the Company in all  capacities
during the three most recent fiscal years.


Summary Compensation Table
<TABLE>
<CAPTION>

                                                                               Stock
     Name of Individual                                                   Options Granted       Long-Term
   and Principal Position        Year         Salary          Bonus             (1)           Compensation
------------------------------ --------- ----------------- ------------- ------------------- ----------------

<S>                            <C>           <C>              <C>              <C>                 <C>
Michael E. Recca               2003(2)       $122,000         $ -                -                 $ -
Chairman                       2002          $120,000         $ -              25,000              $ -
                               2001          $120,000         $ -              37,500              $ -

Franklin C. Karp               2003(2)       $163,000        $ 44,000            -                 $ -
President                      2002          $156,000        $109,000          50,000              $ -
                               2001          $147,000        $ 50,000          37,500              $ -

Joseph J. Calabrese            2003(2)       $153,000        $ 41,000            -                 $ -
Executive Vice President       2002          $146,000        $ 88,000          50,000              $ -
Chief Financial Officer,       2001          $138,000        $ 40,000          37,500              $ -
   Treasurer and Secretary

Michael A. Beck                2003(2)       $138,000        $ 41,000            -                 $ -
Vice President of              2002          $131,000        $ 88,000          50,000              $ -
   Operations                  2001          $123,000        $ 40,000          37,500              $ -

Roland W. Hiemer               2003(2)       $94,000         $17,000             -                 $ -
Vice President of              2002          $85,000          $9,000           30,000              $ -
   Merchandising               2001          $80,000         $25,000           22,500              $ -

<FN>
(1)--See "Stock Option Plan" for related information relating to stock option
grants.

(2)--Fiscal 2003 is a fifty-three week year and, as a result, salary amounts
include fifty-three weeks of compensation.
</FN>
</TABLE>

Severance Agreements

In fiscal year 2000, the Company's  Board of Directors  approved and the Company
entered into  substantially  similar Amended and Restated  Severance  Agreements
(each an "Amended Severance  Agreement") with each of Michael E. Recca, Franklin
C. Karp, Joseph J. Calabrese, and Michael A. Beck, executives of the Company.

Each Amended  Severance  Agreement  provides  that in the event the executive is
terminated for any reason other than for cause, as defined in the agreement, and
in the event of a change in  control  (as  defined),  such as a merger,  sale or
disposition of assets,  change in the  constitution of the Board of Directors or
the current Chairman, the assignment to the executive of a position inconsistent
with the executive's  current position or relocation of the corporate office (as
defined),  or in the event of a  potential  change in control (as  defined),  or
disability  (as defined),  and within one hundred eighty (180) days from the day
of one of the foregoing  events the  executive is  terminated  for reasons other
than for cause or the executive  terminates his  employment for any reason,  the
respective executive shall receive, among other things:

i.   a cash amount equal to the higher of: (x) the executive's base salary prior
     to termination or the event giving rise to the change in control, potential
     change in control or disability,  or (y) the executive's  base salary prior
     to the  event  giving  rise  to the  executive's  right  to  terminate  his
     employment for any reason;

ii.  a cash  payment  equal to the  higher of:  (x)  twelve  (12)  months of the
     executive's  highest  monthly  car  allowance  or  monthly  average  travel
     reimbursement in effect within the six (6) month period  immediately  prior
     to  termination  or the change in control,  potential  change in control or
     disability,  not to exceed twelve thousand and 00/100 ($12,000) dollars, or
     (y) twelve (12) months of the executives  highest  monthly car allowance or
     monthly  average  travel  reimbursement  in effect within the six (6) month
     period  immediately  prior  to  the  date  the  executive   terminates  his
     employment  for any  reason,  not to  exceed  twelve  thousand  and  00/100
     ($12,000) dollars; and

iii. the maximum /highest benefits which the executive was receiving at any time
     during  a  two-year  period  prior  to  termination,   relating  to  health
     insurance,   accident   insurance,   long-term  care,  life  insurance  and
     disability,  which  shall  continue  for one (1)  year  beyond  the date of
     termination of the executive's employment.

Roland W. Hiemer's severance agreement provides that in the event the Company is
sold or merged with  another  company,  involved in a corporate  reorganization,
among other  things,  and Mr. Hiemer is terminated or asked to accept a position
other than that of a senior  officer  requiring  similar  responsibilities  as a
result of a  reorganization  or change in ownership or control,  and he declines
the new position, the Company or its successor in control will be obligated, and
continue  to pay him at the same salary and car  allowance,  if any, he had most
recently been earning, plus benefits, for a period of six months.

The  severance  agreement  for Mr.  Hiemer also provides that in the event he is
terminated for any other reasons, except conduct that is materially injurious to
the Company or conviction of any crime  involving moral  turpitude,  the Company
will be obligated  and continue to pay Mr. Hiemer at the same salary he has most
recently been earning,  for a period following  termination of three months plus
full coverage of the Company's benefits for the same period.

Compensation Committee Report on Executive Compensation

The Compensation and Stock Option  Committee  ("Compensation  Committee") of the
Board of Directors  establishes the Company's general  compensation  policies as
well as the compensation  plans and specific  compensation  levels for executive
officers.  It also  administers  our employee  stock  option plan for  executive
officers.

The  Compensation  Committee  believes  that the  compensation  of the Company's
executive officers should be influenced by performance.  Base salary levels, and
any salary increases are approved by the Compensation Committee. In fiscal 2003,
2002 and 2001,  additional  compensation  in the form of cash  bonuses and stock
options  (fiscal  2002 and 2001) were made in  accordance  with a quarterly  and
annual bonus plan, as approved by the Compensation  Committee.  The Compensation
Committee  believes that the executive  officers salaries during these years did
not exceed  levels in the industry for  similarly-sized  businesses.  For fiscal
2004,  the  Compensation  Committee is  considering  a revision in the executive
bonus plan in an attempt to better  reflect  achievement of goals to be defined.
Severance agreements exist for all executive officers.

Prior to fiscal 2003,  stock option  grants have been part of the bonus plan for
executive officers.  The Compensation Committee viewed these option grants as an
important component of its long-term, performance-based compensation philosophy.
Since the value of an option bears a direct  relationship to the Company's stock
price,  the  Compensation  Committee  believes that options  motivate  executive
officers to manage the Company in a manner that will also benefit  shareholders.
As such, options were granted,  only if performance levels were achieved, at the
current  market  price.  One of the  principal  factors  considered  in granting
options to an executive officer was the executive officer's ability to influence
the Company's  long-term growth and  profitability.  As only a limited number of
options  remain  available  for grant,  no  options  were  granted to  executive
officers in fiscal 2003.

With respect to the base salary  granted to Mr. Karp,  the Company's  President,
the Compensation  Committee made a favorable  assessment of the Company's actual
operating  results for fiscal 2003, as compared to the Company's  goals and from
the  performance  of Mr. Karp on various  accomplishments  for fiscal 2003.  The
Compensation  Committee also considered Mr. Karp's relative position as compared
to his peers in the  industry.  Based on these  factors,  Mr.  Karp's salary was
increased to $165,000 for fiscal 2004. No stock options were granted to Mr. Karp
in fiscal 2003.

In fiscal  2003,  no stock  options  were  granted  to the  Company's  executive
officers.

Stock Option Plan

In April 1997, the Company adopted a stock option plan,  which currently  covers
1,000,000  shares of the Common Stock.  At November 1, 2003,  options  currently
outstanding  aggregating  989,100 and 10,900  options are  available  for grant.
Options may be designated as either (i) incentive  stock options  ("ISOs") under
the Internal Revenue Code of 1986, as amended (the "Code") or (ii) non-qualified
stock options.  ISOs may be granted under the Stock Option Plan to employees and
officers of the Company.  Non-qualified  options may be granted to  consultants,
directors  (whether  or not they are  employees),  employees  or officers of the
Company  (collectively  "Options").  In certain  circumstances,  the exercise of
Options may have an adverse effect on the market price of the Common Stock.  The
Stock Option Plan was approved by the Company's shareholders in fiscal 1998.

The Stock Option Plan is intended to encourage  stock  ownership by employees of
the Company, so that they may acquire or increase their proprietary  interest in
the Company and to  encourage  such  employees  and  directors  to remain in the
employ of the  Company and to put forth  maximum  efforts for the success of the
business.  Options  granted  under the Stock Option Plan may be  accompanied  by
either stock appreciation  rights ("SARS") or limited stock appreciation  rights
(the "Limited SARS"), or both.

The  Plan  is  administered  by the  Compensation  Committee  as the  Board  may
establish  or  designate.  The  members  of the  Compensation  and Stock  Option
Committee  are  William F.  Kenny III,  Jeffrey  A.  Wurst,  Fredric J.  Gruder,
Nicholas A. Marshall and Ira J. Lamel.

The Compensation and Stock Option Committee,  within the limitation of the Stock
Option Plan,  shall have the  authority to determine  the types of options to be
granted,  whether an Option shall be  accompanied  by SARS or Limited SARS,  the
purchase price of the shares of Common Stock covered by each Option (the "Option
Price"),  the persons to whom, and the time or times at which,  Options shall be
granted,  the number of shares to be  covered  by each  Option and the terms and
provisions of the option agreements.

The  maximum  aggregate  number of shares of Common  Stock as to which  Options,
Rights and Limited  Rights may be granted under the Stock Option Plan to any one
optionee  during any fiscal  year of the Company is  100,000,  as  approved  and
amended by the shareholders in fiscal 2000.

With respect to the ISOs,  in the event that the  aggregate  fair market  value,
determined as of the date the ISO is granted, of the shares of Common Stock with
respect to which Options  granted and all other option plans of the Company,  if
any,  become  exercisable for the first time by any optionee during any calendar
year exceeds $100,000,  Options granted in excess of such limit shall constitute
non-qualified stock options for all purposes.  Where the optionee of an ISO is a
ten (10%)  percent  shareholder,  the Option Price will not be less than 110% of
the fair market value of the Company's  Common Stock,  determined on the date of
grant,  and the exercise  period will not exceed five (5) years from the date of
grant of such ISO. Otherwise, the Option Price will not be less than one hundred
(100%) percent of the fair market value of the shares of the Common Stock on the
date of grant,  and the exercise  period will not exceed ten (10) years from the
date of grant.  Options granted under the Plan shall not be  transferable  other
than by will or by the laws of descent  and  distribution,  and  Options  may be
exercised,  during the lifetime of the optionee,  only by the optionee or by his
guardian or legal representative.

In fiscal 2003,  no stock  options were granted to the  Company's  executives or
directors.

In fiscal 2002, the Company's  Compensation and Stock Option Committee  approved
two grants of incentive  stock  options  aggregating  205,000,  to the Company's
officers to purchase the Company's  Common Stock at exercise prices from $1.15 -
$1.35 per  share.  The fiscal  2002  incentive  stock  options  are  exercisable
immediately.

In fiscal 2001, the Company's  Compensation and Stock Option Committee  approved
three grants of incentive stock options  aggregating  262,500,  to the Company's
officers  and outside  directors,  to purchase  the  Company's  Common  Stock at
exercise prices from  $.8125-$1.375  per share.  The fiscal 2001 incentive stock
options are exercisable immediately.

No stock options were exercised by executives or directors in fiscal 2003.

Exercise prices for options outstanding as of November 1, 2003, are as follows:
<TABLE>
<CAPTION>

                                                                               Weighted-
                                 Number of                                      Average
                                  Options               Options                Remaining
                               Outstanding at          Exercisable at       Contractual Life
    Exercise Price               Year End             End of Year             in Years
------------------------ ---------------------- ---------------------- ----------------------
<S>     <C>                       <C>                    <C>                       <C>
        $.8125                    90,000                 90,000                    8
        $.8937                    12,500                 12,500                    8
        $.9375                    90,000                 90,000                    8
         $1.00                    62,625                 62,625                    5
        $1.0313                   25,000                 25,000                    8
         $1.15                    90,000                 90,000                    9
        $1.265                    25,000                 25,000                    4
         $1.35                    90,000                 90,000                    9
        $1.375                    45,000                 45,000                    8
         $1.50                   222,500                222,500                    6
         $1.75                   102,500                102,500                    7
         $1.86                    57,500                 57,500                    7
        $1.925                    12,500                 12,500                    7
         $2.00                     4,975                  4,975                    4
         $3.00                    59,000                 59,000                    4
                         ---------------------- ----------------------
                                 989,100                989,100                    7
                         ====================== ======================
</TABLE>



PERFORMANCE GRAPH

The following graph shows a 60-month  comparison of the cumulative  total return
to  shareholders  for the  Company,  The Russell  2000 Index and a peer group of
substantially larger electronics companies.  The graph assumes that the value of
investment in the  Company's  Common Stock and in each index was $100 on October
31, 1998, including the reinvestment of dividends,  if any. The Company's fiscal
year is either a 52 or 53-week  year with the fiscal year ending on the Saturday
closest to October  31. All fiscal  years  presented  in the  performance  graph
include 52 weeks, except fiscal 2003, which includes 53 weeks.

[GRAPH OMITTED]



Item 12. Security Ownership of Certain Beneficial Owners and Management.

The  following  table  sets  forth  certain  information  with  respect  to  the
beneficial  ownership of shares of Common Stock as of November 1, 2003, based on
information  obtained from the persons named below,  by (i) each person known to
the Company to beneficially own more than 5% of the outstanding shares of Common
Stock,  (ii) each executive  officer and director of the Company,  and (iii) all
officers and directors of the Company as a group:
<TABLE>
<CAPTION>

                Name and Address of                       Title        Amount and Nature of
                  Beneficial Owner                       of Class      Beneficial Ownership     Percentage
----------------------------------------------------- --------------- ------------------------ --------------

<S>                                                       <C>                 <C>                   <C>
Harvey Acquisition Company LLC ("HAC")                    Common              253,932               7.6%
c/o Michael E. Recca
949 Edgewood Avenue
Pelham Manor, NY 10803

Michael E. Recca                                          Common              430,078 (1)          12.3%
949 Edgewood Avenue
Pelham Manor, NY 10803

Matthew and Alicia Larson                                 Common              365,800              11.0%
c/o CIBC 200 Liberty Street
New York, NY 10281

Ronald I. And Joyce L. Heller                             Common              194,900               5.9%
74 Farview Road
Tenafly, New Jersey 07670

Jeffrey A. Wurst                                          Common               46,050 (6)           1.4%
c/o Ruskin Moscou Faltischek P.C.
190 EAB Plaza
Uniondale, NY 11556

William F. Kenny, III                                     Common               53,989 (2)           1.6%
Harvey Electronics, Inc.
205 Chubb Avenue
Lyndhurst, NJ 07071

Fredric J. Gruder                                         Common               40,000 (2)           1.2%
775 Park Avenue
Huntington, NY 11753

Nicholas A. Marshall                                      Common                   -0-              -
113 Horseshoe Road
Mill Neck, N Y 11765

Ira J. Lamel                                              Common                   -0-              -
58 South Service Road
Melville, NY 11747

Franklin C. Karp                                          Common              234,500 (3)           6.6%
Harvey Electronics, Inc.
205 Chubb Avenue
Lyndhurst, NJ 07071

Joseph J. Calabrese                                       Common              201,702 (4)           5.7%
Harvey Electronics, Inc.
205 Chubb Avenue
Lyndhurst, NJ 07071

Michael A. Beck                                           Common              197,500 (4)           5.6%
Harvey Electronics, Inc.
205 Chubb Avenue
Lyndhurst, NJ 07071

Roland W. Hiemer                                          Common              107,500 (5)           3.1%
Harvey Electronics, Inc.
205 Chubb Avenue
Lyndhurst, NJ 07071

All Directors and Officers as a group                     Common            1,311,319 (7)          30.3%
(10 Persons)

All Beneficial Owners as a group                          Common            1,872,019 (7)          43.2%
<FN>

(1)  Includes shares owned by HAC, of which Mr. Recca is a member and the sole
     manager, plus options to purchase up to 160,000 shares of the Company's
     Common Stock which are exercisable at an exercise price of between
     $.8937-$1.925 per share.

(2)  Includes options to purchase up to 40,000 shares of the Company's Common
     Stock, which is exercisable at an exercise price of between $.8125-$1.375
     per share.

(3)  Includes options to purchase up to 212,500 shares of the Company's Common
     Stock, which are exercisable at an exercise price of between $.8125-$.300
     per share.

(4)  Includes options to purchase up to 190,000 shares of the Company's Common
     Stock, which are exercisable at an exercise price of between $.8125-$3.00
     per share.

(5)  Includes options to purchase up to 105,000 shares of the Company's Common
     Stock, which are exercisable at an exercise price of between $.8125-$3.00
     per share.

(6)  Includes a warrant to purchase 15,000 shares of the Company's Common Stock,
     in the name of Ruskin Moscou Faltischek, P.C., the law firm in which Mr.
     Wurst is a Partner, at an exercise price of $5.00 per share. Mr. Wurst has
     expressly disclaimed beneficial ownership of this warrant. Also includes
     options to purchase up to 30,000 shares of the Company's Common Stock,
     which is exercisable at an exercise price of between $.8125-$1.375 per
     share.

(7)  Includes options and warrants to purchase up to 982,500 shares of Common
     Stock, which are exercisable at an exercise price of between $.8125-$5.00
     per share.
</FN>
</TABLE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
officers  and  directors,  and  persons  who own more  than ten  percent  of the
Company's common stock, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the  Securities  and Exchange  Commission  and NASDAQ.  In
addition,  officers,  directors  and greater than ten percent  shareholders  are
required  by  Securities  and  Exchange  Commission  regulations  to furnish the
Company with copies of all Section 16(a) forms they file.

To the  Company's  knowledge,  based  solely on its review of the copies of such
forms received by it, and written representations from certain reporting persons
that no Forms 5 were  required  for those  persons,  the Company  believes  that
during the  fiscal  year  ended  November  1, 2003,  all  Section  16(a)  filing
requirements applicable to its officers,  directors and greater than ten percent
beneficial owners were fully satisfied,  except that William F. Kenny, III filed
a Form 4 late on October 1, 2003.

Item 13. Certain Relationships and Related Transactions.

From April 1, 1998 through April 30, 2000, Mr. Recca received  $7,917 per month,
representing a director's  fee in the annual amount of $95,000,  in his capacity
as the Chairman of the Board of Directors of the Company. Effective May 1, 2000,
Mr. Recca was placed on the  Company's  payroll at an annual salary of $120,000,
plus all Company sponsored benefits.

From  January  2001 to April  2002,  Mr.  Recca  had also  been a  principal  of
NorthStar Capital, LLC which was a joint venture between certain of the partners
of Ruskin Moscou Faltischek,  P.C.  ("Ruskin"),  the Company's corporate counsel
and Mr.  Recca.  Since April 2002,  Mr. Recca has been a director of Sky Capital
Holdings, LTD, and of several wholly owned subsidiaries of Sky Capital Holdings,
and the President of Sky Capital,  LLC, a wholly owned subsidiary of Sky Capital
Holdings,  LTD and a NASD  broker-dealer.  Mr.  Recca is also a director  of Sky
Venture  Capital  and Sky  Capital  Ventures  and  several  of their  wholly  or
partially owned subsidiaries.

Jeffrey A. Wurst, Director, is also a Senior Partner with Ruskin. At November 1,
2003 and  October  26 2002,  the  Company  had  amounts  payable  to  Ruskin  of
approximately  $49,000 and  $26,000,  respectively.  The Company also paid legal
fees to Ruskin of $95,000,  $81,000 and $64,000,  in fiscal years 2003, 2002 and
2001, respectively.

Dividends  paid to  preferred  stockholders  aggregated  $70,000,  $74,000,  and
$108,000 for fiscal years 2003, 2002 and 2001, respectively.

Item 14. Principal Accounting Fees and Services

The following represents amounts billed and amounts expected to be billed to the
Company for the professional services of BDO Seidman, LLP rendered during fiscal
years 2003 and 2002:

                                      2003                       2002
                                      ----                       ----

  Audit Fees                      $  60,000                $  55,000

  Audit - Related Fees            $  16,050(1)             $   7,500(2)

  Tax Fees                        $    -                   $    -

  All Other Fees                  $    -                   $    -
                           ------------------------    -----------------------

       Total                      $   76,050                  $   62,500
                           ========================    =======================

(1)  For fiscal 2003,  services  provided under this category  consist of $8,550
     for  services  related to a mid-year  inventory  observation  and  research
     regarding the affect of a change in the  Company's  year-end and $7,500 for
     consultation relating to accounting and SEC issues.

(2)  For fiscal 2002,  services  provided under this category  consist of $7,500
     for consultation relating to accounting and SEC issues.


Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K.

(a)--List of Financial Statements and Financial Statement Schedule and Exhibits:

(1) List of Financial Statements:

    Balance Sheets - November 1, 2003 and October 26, 2002

    Statements of Operations - Fiscal years ended November 1, 2003, October
    26, 2002 and October 27, 2001

    Statements of Shareholders' Equity - Fiscal years ended November 1, 2003,
    October 26, 2002 and October 27, 2001

    Statements of Cash Flows - Fiscal years ended November 1, 2003, October
    26, 2002, and October 27, 2001

    Notes to Financial Statements

(2) List of Financial Statements Schedule:

    Schedule II - Valuation and Qualifying Accounts

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

(3) The following exhibits are hereby incorporated by reference from the
    corresponding exhibits filed under the Company's Form SB-2 under
    Commission File #333--42121:

Exhibit Number Description

3.1.1--Restated Certificate of Incorporation of 1967

3.1.2--Certificate of Amendment of the Certificate of Incorporation of 1997

3.1.3--Certificate  of Amendment of the Certificate of Incorporation of December
1996

3.1.4--Certificate of Amendment of Certificate of Incorporation of July 1988

3.1.5--Certificate of Amendment of Certificate of Incorporation of July 1971

3.1.6--Certificate of Amendment of Certificate of Incorporation of February 1971

3.1.7--Certificate of Amendment of Certificate of Incorporation of June 1969

3.1.8--Certificate  of Amendment of  Certificate of  Incorporation  of September
1968

4.1--Sections  in  Certificate  of  Incorporation  and the Amended and  Restated
By-Laws of Harvey  Electronics,  Inc.,  that define the rights of the holders of
shares of Common  Stock,  Preferred  Stock and holders of Warrants  (included in
Exhibit Nos. 3.1.2 and 3.1.3)

4.2--Form of Common Stock Certificate

4.3--Form of Redeemable Common Stock Purchase Warrant

4.4--Form of Representative's Warrant

4.5--Form of Warrant to Holders of Preferred Stock

10.1.1--Stock Option Plan of Harvey Electronics, Inc.

10.1.2--Form of Stock Option Agreement

10.2.1--Severance Agreement with Franklin C. Karp

10.2.2--Severance Agreement with Joseph J. Calabrese

10.2.3--Severance Agreement with Michael A. Beck

10.2.4--Severance Agreement with Roland W. Hiemer

10.4.1--Dealer Agreement between the Company and Mitsubishi Electronics America,
Inc.

10.4.2--Dealer Agreement between the Company and Niles Audio Corporation, Inc.

10.5.1--Lease between the Company and Joseph P. Day Realty Corp. (2)

10.5.2--Lease between the Company and Goodrich Fairfield Associates, L.L.C. (2)

10.5.3--Lease between the Company and Sprout Development Co. (2)

10.5.4--Lease between the Company and Service Realty Company (2)

10.5.5--Lease between the Company and 205 Associates (2)

10.5.6--Sublease  between the Company and Fabian  Formals,  Inc.  and  Affiliate
First Nighter of Canada (2)

10.6--Loan and Security Agreement,  Master Note and Trademark Security Agreement
with Paragon Capital L.L.C.

(ii) The following exhibits are hereby incorporated by reference from Exhibit A
filed as part of the registrant's Form 8-K dated November 3, 1997:

2.1.1--Restated  Modified Amended Joint and  Substantially  Consolidated Plan of
Reorganization of Harvey Electronics, Inc.

2.1.2--Order dated November 13, 1996 Confirming Plan of Reorganization

(iii) The following  exhibits are hereby  incorporated  by reference from Item 7
filed as part of the registrant's Form 8-K dated April 7, 1998:

4.4--Representative's Warrant Agreement

4.5--Warrant Agent Agreement

10.1--Underwriting Agreement

10.2--Financial  Advisory and Investment  Banking  Agreement between the Company
and The Thornwater Company, L.P.

(iv)  The  following  exhibits  are  hereby  incorporated  by  reference  to the
corresponding exhibits filed with the Company's Form 8-K dated October 12, 1998:

10.01--Bang & Olufsen America, Inc. Termination Letter dated September 7, 1998

10.02--Bang & Olufsen America, Inc. New Agreement Letter dated October 8, 1998

10.03--Agreement with Thornwater regarding termination of agreements and lock-up
amendments dated October 31, 1998

(v) The following exhibits are hereto incorporated by reference to the Company's
Form 10KSB dated October 31, 1998:

10.5.7--Lease Agreement with Martin Goldbaum and Sally Goldbaum

10.5.8--Lease Agreement with Bender Realty

10.7--Surrender of Lease with 873 Broadway Associates

10.8--Contract  of Sale with Martin  Goldbaum,  Sally Goldbaum,  the Sound Mill,
Inc. and Loriel Custom Audio Video Corp.

10.9--License Agreement with ABC Home Furnishings, Inc.

(vii) The  following  exhibits  are  hereto  incorporated  by  reference  to the
Company's Form 10KSB dated October 28, 2000:

10.2.5--Severance Agreement between the Company and Michael E. Recca

10.2.6--Amended  and  Restated  Severance  Agreement  between  the  Company  and
Franklin C. Karp

10.2.7--Amended  and Restated Severance Agreement between the Company and Joseph
J. Calabrese

10.2.8--Amended and Restated Severance Agreement between the Company and Michael
A. Beck

10.5.9--Sublease Agreement between the Company and Bang & Olufsen America, Inc.

10.6--Lease Agreement between the Company and WSG Eatontown LP

10.6.1--Lease Modification Agreement between the Company and WSG Eatontown LP

10.6.2--Renewal of License Agreement with ABC Home Furnishings, Inc.

10.10--Repurchase  Agreement between the Company,  Bang & Olufsen America,  Inc.
and Paragon Capital, L.L.C.

10.11--Addendum  to  Repurchase  Agreement  between the Company,  Bang & Olufsen
America, Inc. and Paragon Capital, L.L.C.

10.12--Second  Amendment to Loan and Security  Agreement  with Paragon  Capital,
L.L.C.

10.13--Third  Amendment to Loan and  Security  Agreement  with Paragon  Capital,
L.L.C.

10.14--Consulting Agreement with Mesa Partners Inc.

10.15--Addendum to Consulting Agreement with Mesa Partners, Inc.

10.16--Warrant to purchase 15,000 shares of the Company's Common Stock, issued
to Mesa Partners, Inc.

10.17--Investor relations agreement with Porter, LeVay & Rose

(viii)--The following exhibits are hereto incorporated by reference to the
Company's Form 10KSB dated October 27, 2001:

10.6.3--Modification of Lease between the Company and Service Realty Company

10.6.4--First Amendment of Lease between the Company and 205 Associates

(ix) --The following exhibits are hereto incorporated by reference to the
Company's Form 10K dated October 26, 2002:

10.6.5--Lease Extension Agreement between the Company and Sprout Development Co.

10.6.6--Second Amendment of lease between the Company and 205 Chubb Avenue, LLC

(x) --The  following  exhibits  are  hereby  incorporated  by  reference  to the
corresponding  exhibits  filed with the  Company's  Form 8-K dated  November 25,
2003:

10.18--Loan and Security Agreement by and between Harvey  Electronics,  Inc. and
Whitehall Retail Finance, a division of Whitehall  Business Credit  Corporation,
dated November 21, 2003.

10.19--Trademark Security Agreement by and between Harvey Electronics,  Inc. and
Whitehall Retail Finance, a division of Whitehall  Business Credit  Corporation,
dated November 21, 2003.

10.20--Repurchase Agreement by and among Bang & Olufsen America, Inc., Whitehall
Retail Finance,  a division of Whitehall  Business Credit Corporation and Harvey
Electronics, Inc., dated November 21, 2003.

(xi) --The following exhibits are annexed hereto:

10.6.7 - Renewal of License Agreement with ABC Home Furnishings, Inc.

14.1 --Code of Ethics

23. --Consent of BDO Seidman, LLP

23.1--Consent of Ernst and Young, LLP

31.1--Certification - President

31.2--Certification - CFO

32.1--Certification - President

32.2--Certification - CFO

(b) --Reports on Form 8-K:

On October 10, 2003, the Company filed Form 8-K with the Securities and Exchange
Commission  announcing it had received  notice from NASDAQ that its Common Stock
failed to maintain a minimum bid price of $1.00 over the previous 30 consecutive
trading days as required by the NASDAQ SmallCap Market.

On  November  25,  2003,  the  Company  filed Form 8-K with the  Securities  and
Exchange  Commission,  announcing the  successful  closing of a new $7.5 million
credit facility with Whitehall Retail Finance.



Signatures

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                            Harvey Electronics, Inc.

                            By: /s/ Franklin C. Karp
                                --------------------
                                Franklin C. Karp, President

Dated: January 30, 2004

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dated indicated.
<TABLE>
<CAPTION>

             Signature                                     Title                                Date
             ---------                                     -----                                ----

<S>                                   <C>                                               <C>
/s/ Franklin C. Karp                  President and Director                            January 30, 2004
-------------------------------------
    Franklin C. Karp

/s/ Joseph J. Calabrese               Executive Vice President, Chief Financial         January 30, 2004
------------------------------------- Officer, Treasurer, Secretary and Director
    Joseph J. Calabrese


/s/ Michael E. Recca                  Chairman and Director
-------------------------------------
    Michael E. Recca

/s/ William F. Kenny, III             Director
-------------------------------------
    William F. Kenny, III

/s/ Fredric J. Gruder                 Director
-------------------------------------
    Fredric J. Gruder

/s/ Jeffrey A. Wurst                  Director
-------------------------------------
    Jeffrey A. Wurst

/s/ Nicholas A. Marshall              Director
-------------------------------------
    Nicholas A. Marshall

/s/ Ira J. Lamel                      Director
-------------------------------------
    Ira J. Lamel
</TABLE>



<TABLE>
<CAPTION>

Item 8. Financial Statements and Supplementary Data

                            Harvey Electronics, Inc.

               Index to Financial Statements and Supplemental Data


<S>                                                                                                      <C>
Report of Independent Certified Public Accountants.................................................    F-2

Report of Independent Auditors.....................................................................    F-3

Balance Sheets--November 1, 2003 and October 26, 2002..............................................    F-4

Statements of Operations--Fiscal years ended November 1, 2003, October 26, 2002
   and October 27, 2001............................................................................    F-5

Statements of Shareholders' Equity--Fiscal years ended November 1, 2003,
   October 26, 2002 and October 27, 2001...........................................................    F-6

Statements of Cash Flows--Fiscal years ended November 1, 2003,
   October 26, 2002 and October 27, 2001...........................................................    F-7

Notes to Financial Statements...................................................................... F-8-27

The following financial statement schedule of Harvey Electronics, Inc. is included as supplementary data:

Schedule II - Valuation and Qualifying Accounts....................................................   F-28

Report of Independent Certified Public Accountants.................................................   F-29
</TABLE>


               Report of Independent Certified Public Accountants



The Board of Directors and Shareholders
Harvey Electronics, Inc.


We have audited the accompanying  balance sheets of Harvey Electronics,  Inc. as
of  November  1, 2003 and  October  26,  2002,  and the  related  statements  of
operations,  shareholders' equity and cash flows for the years then ended. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Harvey Electronics,  Inc. as of
November 1, 2003 and October 26, 2002, and the results of its operations and its
cash flows for the years then ended in  conformity  with  accounting  principles
generally accepted in the United States of America.

As discussed in Note 1 to the financial statements,  effective October 27, 2002,
the Company adopted Statement of Financial Standards No. 142, Goodwill and Other
Intangible Assets.

/s/ BDO Seidman, LLP
--------------------
BDO Seidman, LLP

Melville, New York

December 23, 2003




                         Report of Independent Auditors



The Board of Directors and Shareholders
Harvey Electronics, Inc.


We have audited the accompanying statements of operations, shareholders' equity
and cash flows of Harvey Electronics, Inc. for the year ended October 27, 2001.
Our audit also included the financial statement schedule listed in the Index at
Item 15(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  results  of  operations  and cash flows of Harvey
Electronics,  Inc.  for the year ended  October 27,  2001,  in  conformity  with
accounting  principles  generally  accepted in the United  States.  Also, in our
opinion,  the related financial statement schedule,  when considered in relation
to the  basic  financial  statements  taken as a whole,  present  fairly  in all
material respects the information set forth therein.


                                                   /s/ Ernst & Young LLP
                                                   ---------------------
Melville, New York
December 28, 2001


<TABLE>
<CAPTION>

                            Harvey Electronics, Inc.
                                 Balance Sheets
                                                                          November 1,        October 26,
                                                                              2003              2002
                                                                         --------------- -----------------
Assets
Current assets:
<S>                                                                             <C>               <C>
   Cash and cash equivalents                                                    $16,000           $15,990
   Accounts receivable, less allowance of $20,000 and $20,000                   751,293           634,663
   Inventories                                                                7,416,978         6,804,161
   Prepaid expenses and other current assets                                    177,394           212,692
                                                                         --------------- -----------------
Total current assets                                                          8,361,665         7,667,506
                                                                         --------------- -----------------
Property and equipment:
   Leasehold improvements                                                     3,640,023         3,363,928
   Furniture, fixtures and equipment                                          2,103,964         1,941,765
   Internet website                                                             456,870           441,670
                                                                         --------------- -----------------
                                                                              6,200,857         5,747,363
   Less accumulated depreciation and amortization                             3,433,969         2,730,164
                                                                         --------------- -----------------
                                                                              2,766,888         3,017,199
Equipment under capital leases, less accumulated amortization
  of $384,706 and $382,537                                                       13,115            62,023
Goodwill                                                                        125,000           125,000
Reorganization value in excess of amounts allocable to identifiable
  assets                                                                        791,440           986,440
 Other assets, less accumulated amortization of $248,769 and
   $183,794                                                                     266,498           293,297
                                                                         --------------- -----------------
Total assets                                                                $12,324,606       $12,151,465
                                                                         =============== =================
Liabilities and shareholders' equity
Current liabilities:
  Revolving line of credit facility                                          $        0        $3,119,493
  Trade accounts payable                                                      2,280,019         2,274,833
  Customer deposits                                                           1,693,263         1,484,237
  Accrued expenses and other current liabilities                              1,310,278         1,293,207
  Income taxes                                                                  104,500            50,200
  Cumulative Preferred Stock dividends payable                                   23,432            23,432
  Current portion of capital lease obligations                                        0            22,420
                                                                         --------------- -----------------
Total current liabilities                                                     5,411,492         8,267,822
                                                                         --------------- -----------------

Long-term liabilities:
  Revolving line of credit facility                                           2,725,603                 0
  Deferred rent                                                                 242,737           155,615
                                                                          --------------- -----------------
Total long-term liabilities                                                   2,968,340           155,615
                                                                         --------------- -----------------

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 827 shares (aggregate
   liquidation preference--$827,000)

                                                                                379,982           379,982
Common Stock, par value $.01 per share; authorized 10,000,000 shares;
issued and outstanding 3,324,525 shares                                          33,245            33,245
  Additional paid-in capital                                                  7,601,305         7,601,305
  Accumulated deficit                                                       (4,069,758)       (4,286,504)
                                                                         --------------- -----------------
Total shareholders' equity                                                    3,944,774         3,728,028
                                                                         --------------- -----------------
Total liabilities and shareholders' equity                                  $12,324,606       $12,151,465
                                                                         =============== =================

See accompanying notes to financial statements.
</TABLE>




                            Harvey Electronics, Inc.
                            Statements Of Operations
<TABLE>
<CAPTION>
                                                             Fifty-three Weeks        Fifty- two Weeks           Fifty- two Weeks
                                                                   Ended                    Ended                      Ended
                                                                November 1,             October 26,                October 27,
                                                                    2003                    2002                       2001
                                                          ------------------------- --------------------- --------------------------

<S>                                                                    <C>                   <C>                   <C>
Net sales                                                              $42,448,216           $41,326,577           $36,606,206
Interest and other income                                                   72,677               116,021                82,917
                                                          ------------------------- --------------------- --------------------------
                                                                        42,520,893            41,442,598            36,689,123
                                                          ------------------------- --------------------- --------------------------

Cost of sales                                                           25,140,486            24,973,269            22,471,054
Selling, general and administrative expenses                            16,555,451            15,806,022            15,128,410
Interest expense                                                           342,915               358,836               339,894
                                                          ------------------------- --------------------- --------------------------
                                                                        42,038,852            41,138,127            37,939,358
                                                          ------------------------- --------------------- --------------------------

Income (loss) before income taxes                                          482,041               304,471           (1,250,235)
Income taxes                                                               195,000               124,000                    0
                                                          ------------------------- --------------------- --------------------------
Net income (loss)                                                          287,041               180,471           (1,250,235)

Preferred Stock dividend requirement                                        70,295                72,777               74,376
                                                          ------------------------- --------------------- --------------------------
Net income (loss) applicable to Common Stock                              $216,746              $107,694           ($1,324,611)
                                                          ========================= ===================== ==========================

Net income (loss) per share applicable to common shareholders:

  Basic                                                                      $0.07                 $0.03             ($0.40)
                                                          ========================= ===================== ==========================
  Diluted                                                                    $0.06                 $0.03             ($0.40)
                                                          ========================= ===================== ==========================

Shares used in the calculation of net income (loss) per common share:

  Basic                                                                  3,324,525             3,297,827            3,282,833
                                                          ========================= ===================== ==========================
  Diluted
                                                                         3,866,415             3,907,401            3,282,833
                                                          ========================= ===================== ==========================
See accompanying notes to financial statements.
</TABLE>


                            Harvey Electronics, Inc.
                        Statement of Shareholders' Equity

<TABLE>
<CAPTION>

                                                                                     Additional                           Total
                                     Preferred Stock            Common Stock           Paid-in       Accumulated      Shareholders'
                                  ----------------------- -------------------------
                                   Shares      Amount        Shares       Amount       Capital         Deficit           Equity
                                  --------- ------------- ------------- ----------- -------------- ---------------- ---------------
<S>                <C> <C>             <C>      <C>          <C>           <C>         <C>            <C>               <C>
Balance at October 28, 2000            875      $402,037     3,282,833     $32,828     $7,481,667     $(3,069,587)      $ 4,846,945
   Net loss for the year                 -             -             -           -              -      (1,250,235)      (1,250,235)
   Recorded value of Common
   Stock warrants granted                -             -             -           -         98,000                -           98,000
   Preferred Stock dividend              -             -             -           -              -         (74,376)         (74,376)
                                  --------- ------------- ------------- ----------- -------------- ---------------- ----------------
Balance at October 27, 2001            875       402,037     3,282,833      32,828      7,579,667      (4,394,198)        3,620,334
   Net income for the year               -             -             -           -              -          180,471          180,471
   Preferred Stock dividend              -             -             -           -              -         (72,777)         (72,777)
   Conversion of Preferred Stock
     to Common Stock                  (48)      (22,055)        38,920         389         21,666                -                0
   Exercise of cash-less
     Common Stock warrant                -             -         2,772          28           (28)                -                0
                                  --------- ------------- ------------- ----------- -------------- ---------------- ----------------
 Balance at October 26, 2002           827       379,982     3,324,525      33,245      7,601,305      (4,286,504)        3,728,028
  Net income for the year                -             -             -           -              -          287,041          287,041
  Preferred Stock dividend               -             -             -           -              -         (70,295)         (70,295)
                                  --------- ------------- ------------- ----------- -------------- ---------------- ----------------
Balance at November 1, 2003            827      $379,982     3,324,525     $33,245     $7,601,305     ($4,069,758)       $3,944,774
                                  ========= ============= ============= =========== ============== ================ ================

See accompanying notes to financial statements.
</TABLE>



                             Harvey Electronics, Inc
                            Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                Fifty Three Weeks         Fifty-Two Weeks          Fifty Two Weeks
                                                                      Ended                    Ended                    Ended
                                                                 November 1, 2003         October 26, 2002        October 27, 2001
                                                          ------------------------- ----------------------- ------------------------
Operating activities
<S>                                                                       <C>                     <C>               <C>
Net income (loss)                                                         $287,041                $180,471          ($1,250,235)
Adjustments to reconcile net income (loss) to net
  cash provided by (used in) operating activities:
    Depreciation and amortization                                          795,388                 916,873             989,055
    Income tax equivalent provision                                        195,000                 124,000                -
    Straight-line impact of rent escalations                                87,122                     955            (21,556)
    Miscellaneous                                                         (24,701)                (14,473)             (5,464)
    Changes in operating assets and liabilities:
      Accounts receivable                                                (116,630)                (50,758)            (105,808)
      Allowance for bad debts                                                    -                 (5,000)                -
      Inventories                                                        (574,257)                (17,901)            (168,729)
      Prepaid expenses and other current assets                             42,439                   1,578             (8,708)
      Trade accounts payable                                                 5,186               (659,035)            (95,782)
      Customer deposits                                                    209,026                (37,923)             491,920
      Accrued expenses, other current liabilities
        and income taxes                                                    64,230                 282,125            (88,057)
                                                          ------------------------- ----------------------- ------------------------
Net cash provided by (used in) operating activities                        969,844                 720,912            (263,364)
                                                          ------------------------- ----------------------- ------------------------
Investing activities
Purchases of property and equipment excluding
  Internet website development                                           (454,554)               (220,845)           (1,661,398)
Internet website development                                              (15,200)                (16,040)            (73,032)
Purchases of other assets                                                 (13,475)                 (9,140)              (563)
Security deposits-net                                                            -                  11,935                -
Note receivable-officer                                                          -                       -              7,500
                                                          ------------------------- ----------------------- ------------------------
Net cash used in investing activities                                    (483,229)               (234,090)           (1,727,493)
                                                          ------------------------- ----------------------- ------------------------
Financing activities
Net (payments) proceeds from revolving credit facility                   (393,890)               (322,527)            2,374,311
Preferred Stock dividends paid                                            (70,295)                (74,151)            (107,603)
Principal payments on note payable                                               -                (21,985)            (10,374)
Principal payments on capital lease obligations                           (22,420)                (80,505)            (197,514)
Commitment fee from increased revolving credit facility                          -                       -            (75,000)
                                                          ------------------------- ----------------------- ------------------------
Net cash (used in) provided by financing activities                      (486,605)               (499,168)            1,983,820
                                                          ------------------------- ----------------------- ------------------------
Increase (decrease) in cash and cash equivalents                                10                (12,346)             (7,037)
Cash and cash equivalents at beginning of year                              15,990                  28,336             35,373
                                                          ------------------------- ----------------------- ------------------------
Cash and cash equivalents at end of year                                   $16,000                 $15,990             $28,336
                                                          ========================= ======================= ========================
Supplemental cash flow information:
Interest paid                                                             $347,000                $361,000            $302,000
                                                          ========================= ======================= ========================
Taxes paid                                                                 $17,000                  $6,000             $17,000
                                                          ========================= ======================= ========================
See accompanying notes to financial statements.
</TABLE>

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

The  Company is a  specialty  retailer  and  custom  installer  of high  quality
audio/video  consumer  electronics and home theater products in the Metropolitan
New York area.  Operations of the Company consist solely of this single segment.
The  Company's  fiscal year ends the Saturday  closest to October 31. The fiscal
year ended  November  1, 2003  consists  of 53 weeks and the fiscal  years ended
October 26, 2002 and October 27, 2001 each consist of 52 weeks.

Net sales and operating  results for the  Company's  first quarter of its fiscal
year are positively affected by a strong holiday demand.

Accounting Estimates

The  preparation  of the  financial  statements in  conformity  with  accounting
principles  generally accepted in the United States requires  management to make
estimates and assumptions that affect the financial  statements and accompanying
notes. Management bases its estimates on certain assumptions, which they believe
are  reasonable  in the  circumstances,  and does not believe that any change in
those assumptions would have a significant  effect on the financial  position or
results of operations. Actual results could differ from those estimates.

Revenue Recognition

For the Company,  net sales and  operating  revenues  include  items  related to
normal business operations,  including the sale of goods to customers and custom
installation  revenue.  Retail sales are recorded at the time of the sale to the
customer.  Custom installation  revenue,  which is comprised of both the sale of
products and the labor in connection with the installation of the products,  are
recorded in accordance with the provisions of EITF 00-21,  "Revenue Arrangements
with Multiple Deliverables".  The revenue related to the sale of the products is
recognized  when the product is delivered to the customers.  The revenue related
to the labor in connection with the  installation  of the products,  is recorded
when the service has been  performed.  The amount  representing  labor,  for all
years  presented is less than 9% of revenues,  and accordingly has been included
in net sales.

In addition,  the Company sells  extended  warranty  contracts for a third party
provider.  The profit on extended warranty sales is considered commission at the
time of sale. The net amount earned on these sales, which is not significant, is
recorded in net sales, in accordance with EITF 99-19,  "Reporting  Revenue Gross
as a Principal Versus Net as an Agent."


Long-Lived Assets

Property and equipment are stated at cost.  Depreciation  and  amortization  are
computed by the  straight-line  method over the  estimated  useful  lives of the
respective  assets.  Amortization of improvements to leased  properties is based
upon the  remaining  terms of the leases or the  estimated  useful lives of such
improvements,  whichever  is  shorter.  The  Company  evaluates  the  periods of
amortization continually in determining whether events and circumstances warrant
revised  estimates of useful lives.  If estimates are changed,  the  unamortized
cost will be allocated to the increased or decreased number of remaining periods
in the revised lives.

When  conditions  indicate  a need to  evaluate  recoverability,  SFAS  No.  144
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of" requires that the Company (1) recognize an impairment  loss only
if the carrying  amount of a long-lived  asset is not  recoverable  based on its
undiscounted  future  cash  flows  and (2)  measure  an  impairment  loss as the
difference between the carrying amount and fair value of the asset.

Store Opening Costs

Costs of a non-capital  nature  incurred prior to store openings are expensed as
incurred.  There were no store openings in 2003 or 2002. In fiscal 2001, a store
was opened in Eatontown, NJ.

Stock-Based Compensation

The Company applies the intrinsic-value based method of accounting prescribed by
Accounting  Principles  Board  (APB) No.  25,  "Accounting  for Stock  Issued to
Employees",  and related  interpretations,  in  accounting  for its  stock-based
compensation plans and accordingly, no compensation cost has been recognized for
its stock  options in the financial  statements.  The Company has elected not to
implement  the fair value based  accounting  method for employee  stock  options
under SFAS No. 123, "Accounting for Stock-Based  Compensation",  but has elected
to disclose the pro forma net income (loss) per share for employee  stock option
grants made  beginning in fiscal 1997 as if such method had been used to account
for  stock-based  compensation  costs  described in SFAS No. 148 "Accounting for
Stock Based  Compensation-Transition  and Disclosure",  an amendment of SFAS No.
123.

For the purpose of  determining  the  disclosures  required by SFAS No. 123, the
fair  value  of the  options  were  estimated  at the date of  grant  using  the
Black-Scholes  option  pricing model with the following  assumptions  for fiscal
years 2002 and 2001:  risk-free  interest  rate  ranging  from  4.44%-5.02%  and
4.88%-5.47%,  respectively; no dividend yield; volatility factor of the expected
market price of the Company's Common Stock of 1.00 and 0.938, respectively;  and
a  weighted-average  expected  life of the  options  of 9.39  years and 7 years,
respectively.  F-9 Had  compensation  cost for stock  option  grants  during the
fiscal years 2003,  2002 and 2001 been  determined  under the provisions of SFAS
No. 123, the  Company's  net income  (loss) and earnings  (loss) per share would
have been as follows:
<TABLE>
<CAPTION>


                                                           Fiscal 2003          Fiscal 2002         Fiscal 2001
                                                           -----------          -----------         -----------
<S>                                                         <C>                  <C>               <C>
Net income (loss) as reported                               $216,746             $107,694          $(1,324,611)
Stock-based employee compensation expense
determined under the fair value method                             -             (227,000)            (224,000)
                                              -------------------------------------------------------------------
Pro forma net income (loss)                                 $216,746            $(119,306)         $(1,548,611)
                                              -------------------------------------------------------------------
Net Income (loss) per share applicable
 to common stock:
Basic                                                          $.07                $ .03                 $(.40)
Less compensation expense determined under
the fair value method                                             -                 (.07)                 (.07)
Adjusted basic net income(loss) per share                      $.07                $(.04)                $(.47)
                                              -------------------------------------------------------------------
Net Income (loss) per share applicable
 to common stock:
Diluted                                                         $.06                  $.03                $(.40)
Less compensation expense determined under
the fair value method                                              -                 (.07)                (.07)
                                              -------------------------------------------------------------------
Adjusted diluted net income(loss) per share
                                                                $.06                $(.04)                $(.47)
                                              -------------------------------------------------------------------
</TABLE>

Inventories

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


Internet Website

The  Company  follows  the  provisions  of EITF 00-2,  "Accounting  for  Website
Development  Costs," which provides guidance on how an entity should account for
website  development  costs. In accordance with EITF 00-2, costs incurred in the
website  application  and  infrastructure  development  stage  relating  to  the
acquisition  or  development  of software  or the  development  of graphics  for
internal  use,  should be  accounted  for under the  provisions  of Statement of
Position ("SOP") 98-1,  "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use" and  capitalized.  As such, and in accordance with
SOP 98-1, the Company capitalized  approximately  $15,000,  $26,000, and $73,000
for fiscal years 2003, 2002 and 2001, respectively,  relating to the development
of its website.  These costs are being amortized on a straight-line basis over a
period of one to three years.

Income Taxes

The Company  follows the  liability  method in  accounting  for income  taxes as
described in SFAS No. 109,  "Accounting  for Income  Taxes."  Under this method,
deferred tax assets and liabilities are determined based on differences  between
financial  reporting  and tax bases of assets and  liabilities  and are measured
using the enacted tax rates and laws that will be in effect when the differences
are  expected  to  reverse.  Deferred  income  taxes  reflect the net effects of
temporary differences between the carrying amounts of assets and liabilities for
financial  reporting  purposes and the amounts used for income tax purposes (see
Note 5).

Income (Loss) Per Share

Basic and diluted income (loss) per share are calculated in accordance with SFAS
No. 128,  "Earnings  Per Share." The basic and diluted  income (loss) per common
share for the fiscal years ended November 1, 2003,  October 26, 2002 and October
27, 2001 were  computed  based on the  weighted-average  number of common shares
outstanding.  Common  equivalent  shares  relating to stock options  aggregating
38,970 and 88,476, were included in the weighted average number of common shares
outstanding for fiscal 2003 and 2002,  respectively for the diluted earnings per
share  computation.  No common  equivalent  shares  relating to stock options or
warrants were included in the weighted average number of shares  outstanding for
the basic or diluted  loss per share  computation  for fiscal year 2001 as their
effect was anti-dilutive.

Commencing  January 1, 2001,  the  conversion  price of the Company's  preferred
stock was $1.2333.  In June 2002, 48 shares of preferred stock were converted to
38,920 shares of the  Company's  Common Stock by a preferred  shareholder.  As a
result,  13,969  shares of Common Stock were  included in the  weighted  average
number  of  common  shares  outstanding  for  the  diluted  earnings  per  share
computation for fiscal 2002. Common equivalent shares of 502,920 in fiscal 2003,
relating to the conversion of the remaining  outstanding  preferred stock,  were
included in the weighted  average  number of common shares  outstanding  for the
diluted earnings per share  calculation.  Common  equivalent  shares (670,559 in
fiscal  2002 and 709,479 in fiscal  2001),  relating  to the  conversion  of the
remaining outstanding preferred stock, were not included in the weighted average
number  of  common  shares   outstanding  of  the  diluted  earnings  per  share
calculation, as their effect was antidilutive.

In June 2002,  15,000  warrants  to purchase  the  Company's  Common  Stock were
exchanged for 2,772 shares of Common Stock, effected under a cash-less exercise.
As a result, 1,025 shares were included in the weighted average number of common
shares  outstanding  for the diluted  earnings per share  computation for fiscal
2002.

Options and warrants aggregating 931,637, 3,066,457 and 3,361,233, were excluded
from the  computation  for fiscal years 2003,  2002 and 2001,  respectively,  as
their effect would have been antidilutive.

Cash Equivalents

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

Fair Value of Financial Instruments

The  recorded  amounts  of the  Company's  cash and cash  equivalents,  accounts
receivable  and  accounts  payable  approximate  their fair  values  principally
because  of the  short-term  nature  of  these  items.  The  carrying  value  of
borrowings  under the revolving line of credit facility  approximate fair value,
due to its variable market interest rates.

Concentration of Credit Risk

The  Company's  operations  consist  of the  retail  sale,  service  and  custom
installation of high quality audio,  video and home theater equipment in the New
York  Metropolitan   area.  The  Company  performs  credit  evaluations  of  its
customers'  financial  condition  and  payment  history  but  does  not  require
collateral.  Generally,  accounts  receivable  are due within 30 days and credit
losses have historically been immaterial.

Advertising Expense

In  accordance   with  EITF  02-16,   "Accounting  by  a  Customer  for  Certain
Consideration  Received from a Vendor"  ("EITF  02-16") which  addresses how and
when  to  reflect  consideration   received  from  suppliers  in  the  financial
statements,  the Company's  advertising expense, net of cooperative  advertising
allowances,   is  charged  to  operations  when  the  advertising  takes  place.
Advertising  expense for the years ended November 1, 2003,  October 26, 2002 and
October  27,  2001  was   approximately   $366,000,   $632,000  and  $1,206,000,
respectively. Prepaid advertising for print advertisements not run and broadcast
advertisements  not  aired  at  November  1,  2003  and  October  26,  2002  was
approximately $29,000 and $29,000, respectively.

Reorganization Value and Fresh Start Reporting

The  Company  adopted  Fresh  Start  Reporting  in  accordance  with  SOP  90-7,
"Financial  Reporting by Entities in Reorganization  under the Bankruptcy Code,"
when it emerged from a Chapter 11 proceeding on December 26, 1996. At that time,
Fresh  Start  Reporting  resulted  in changes to the  balance  sheet,  including
valuation of assets and  liabilities  at fair market value,  elimination  of the
accumulated deficit and valuation of equity based on the reorganization value of
the ongoing business.

The   reorganization   value  of  the  Company  was  determined   based  on  the
consideration  received from Harvey Acquisition  Company LLC (HAC) to obtain its
principal ownership in the Company. A carrying value of $318,000 was assigned to
the Preferred  Stock (see Note 5).  Subsequent to the  Reorganization  Date, the
Company  issued an  additional  51,565  shares of  Common  Stock to  InterEquity
Capital Partners, L.P., a pre-reorganization subordinated secured debtholder, as
authorized  by the  Court,  for an  approved  finder's  fee.  The  excess of the
reorganization value over the fair value of net assets and liabilities ($791,440
and $986,440 at November 1, 2003 and October 26, 2002, respectively) is reported
as "Reorganization  value in excess of amounts allocable to identifiable assets"
and was amortized over a 25-year  period,  prior to the adoption of SFAS No. 142
(see  below) in fiscal 2003 where no  amortization  was  recorded.  Amortization
expense of $54,000  and  $60,000 was  recorded  for fiscal  years 2002 and 2001,
respectively.

The Company  follows the  provisions  of Financial  Accounting  Standards  Board
Statements of Financial  Accounting  Standards  ("SFAS") SFAS No. 141,  Business
Combinations,  and SFAS No. 142, Goodwill and Other Intangible Assets. Under the
new standards,  goodwill and intangible  assets deemed to have indefinite  lives
are no longer amortized but are subject to annual impairment tests in accordance
with SFAS 142.

Effective  with the  adoption  of SFAS No. 141 and 142 in the  beginning  of the
first quarter of fiscal 2003, both goodwill and the Company's  other  intangible
asset,  reorganization  value in excess of  amounts  allocable  to  identifiable
assets,  are no longer amortized but are instead subject to an annual impairment
test.  Other  intangible  assets  continue to be amortized over their  estimated
useful lives.

In  the  second  quarter  of  fiscal  2003,  the  Company  engaged  a  qualified
independent  firm,  to perform a  valuation  of the  Company  and to prepare the
necessary goodwill impairment analysis. After completion,  this independent firm
found no  impairment  of the  Company's  goodwill  and other  intangible  asset,
reorganization  value in excess of amounts  allocable  to  identifiable  assets.
Goodwill  and this other  intangible  asset is tested  annually  to  identify if
impairment has occurred.

With the adoption of SFAS No. 142, the Company ceased  amortization  of goodwill
and  reorganization  value in excess of the amounts  allocable  to  identifiable
assets as of October  27,  2002.  The  following  table  presents  the effect of
adoption of SFAS No. 142 on the  reported net income or loss of the Company on a
comparable basis:
<TABLE>
<CAPTION>

                                                             Fiscal 2003        Fiscal 2002        Fiscal 2001
                                                             -----------        -----------        -----------
Net income (loss) applicable to Common
<S>                                                          <C>                <C>                <C>
 Stock                                                       $216,746           $107,694           ($1,324,611)
Add back goodwill amortization                                   -                60,000                60,000
                                                             -----------        -----------        -----------
Adjusted net income (loss)                                   $216,746           $167,694           ($1,264,611)
                                                             ===========        ===========        ===========
Diluted net income (loss) per share:
   Net income (loss)                                         $    .06           $     .03          $      (.40)
   Goodwill amortization                                         -                    .01                  .02
                                                             -----------        -----------        -----------
   Adjusted diluted net income (loss)
     per share                                               $    .06           $      .04         $      (.38)
                                                             ===========        ===========        ===========
</TABLE>

Reclassification

Certain  items in the  fiscal  2002  and 2001  financial  statements  have  been
reclassified to conform to fiscal 2003 presentation.


Recent Accounting Pronouncements

Prior to fiscal 2003, the Financial  Accounting  Standards Board ("FASB") issued
SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived Assets,"
SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, amendment of FASB
Statement No. 13, and Technical  Corrections," and SFAS No. 146, "Accounting for
Costs  Associated  with Exit or  Disposal  Activities."  The  adoption  of these
standards  in fiscal year 2003 did not have a material  effect on the  Company's
financial position or result of operations.

In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others," which clarifies  disclosure,  recognition
and  measurement  requirements  related to certain  guarantees.  The  disclosure
requirements  are effective for financial  statements  issued after December 15,
2002  and the  recognition  and  measurement  requirements  are  effective  on a
prospective basis for guarantees issued or modified after December 31, 2002. The
adoption of FIN 45 had no impact on the Company's financial position and results
of operations.

In July  2003,  the EITF  issued  EITF No.  00-21,  "Revenue  Arrangements  with
Multiple  Deliverables,"  which  provides  guidance  on the timing and method of
revenue  recognition  for sales  arrangements  that include the delivery of more
than one product or  service.  EITF No.  00-21 is  effective  prospectively  for
arrangements  entered into in fiscal periods  beginning after June 15, 2003. The
adoption  of EITF No.  00-21 did not have a  material  effect  on the  Company's
financial position or results of operations.

2. New Revolving Line of Credit Facility

In fiscal 1998, the Company  entered into a three-year  revolving line of credit
facility  with Paragon  Capital  L.L.C.,  currently  Wells Fargo Retail  Finance
("Wells Fargo"),  whereby the Company could borrow up to $3,300,000 based upon a
lending formula (as defined) calculated on eligible inventory.

In fiscal 2000,  the Company  entered into a Second  Amendment to its  revolving
line of credit  facility  ("Amended  Agreement")  with Wells Fargo.  The Amended
Agreement  included a three-year  extension enabling the Company to borrow up to
$3,500,000  based upon a lending formula  calculated on eligible  inventory,  as
defined. Additionally, the Amended Agreement provided for an annual facility fee
of $17,500 and maintenance fees of $1,500 per month.

In fiscal 2001,  the Company  entered into the Third  Amendment to its revolving
line of credit facility ("Third Amended Agreement"). The Third Amended Agreement
increased the amount available under the credit facility to $7.0 million,  again
based on a lending formula  calculated on eligible  inventory,  as defined,  and
extended the credit facility through November 30, 2003. The new interest rate on
all  borrowings was fixed at one percent (1%) over the prime rate with a minimum
interest rate of 8%. However,  effective  January 1, 2002, the minimum  interest
rate was reduced to 6.5% and was in effect  throughout fiscal 2003. A commitment
fee of  $75,000  (amortized  over three  years) was also paid by the  Company in
fiscal 2001. Wells Fargo had a senior security  interest in all of the Company's
assets.  The amended line of credit facility provided Wells Fargo with rights of
acceleration  upon  the  occurrence  of  certain  customary  events  of  default
including,  among others,  the event of bankruptcy.  The line of credit facility
also contained certain financial covenants. As the credit facility was paid down
on November  21, 2003,  no covenant  calculations  were  required at November 1,
2003.

In connection  with the issuance and  extension of the line of credit  facility,
Wells Fargo had received 225,000 warrants to purchase the Company's Common Stock
at exercise prices of between $2.00 - $5.50. These warrants expired November 21,
2003, simultaneous to the satisfaction and termination of the Wells Fargo credit
facility. In accordance with EITF 96-18, "Accounting for Equity Instruments that
are  Issued to Other  than  Employees  for  Acquiring,  or in  Conjunction  with
Selling, Goods or Services," the Company recorded the fair value of the warrants
($75,000) in fiscal 2001 (net book value of $27,000  included in Other Assets in
the accompanying balance sheet as of October 26, 2002), which was amortized over
a three-year period.

On November 21, 2003,  the Company  entered  into a new  five-year  $7.5 million
credit  facility with  Whitehall  Retail  Finance  ("Whitehall"),  a division of
Whitehall Business Credit Corporation, a subsidiary of Connecticut based Webster
Bank. This new credit  facility  replaced the line of credit facility with Wells
Fargo. Under the new credit facility,  the Company can borrow up to $7.5 million
based upon lending  formulas  calculated on eligible credit card receivables and
inventory,  less certain  reserves,  as defined.  The Whitehall  credit facility
expires November 21, 2008.

The interest rate on all borrowings  under the new credit facility is 0.25% over
Webster  Bank's  prime rate (4.25% at November 1, 2003) or LIBOR plus 2.75%,  at
the Company's option.  The Company agreed to pay Whitehall a $25,000  commitment
fee,  payable in two equal  installments  of $12,500,  on November  21, 2003 and
November 21, 2004,  respectively.  Under the credit  facility,  the Company will
also pay Whitehall a reduced  maintenance  fee of $1,000 per month and a monthly
unused line fee,  as defined in the credit  facility.  Simultaneously,  with the
closing of the  Whitehall  credit  facility,  the Company  paid all  outstanding
amounts due to Wells Fargo,  aggregating  $2,504,000,  and Wells Fargo's  senior
security interest in the Company's assets was terminated.

In connection  with the new credit  facility,  the Company  granted  Whitehall a
senior  security  interest in all of the Company's  assets.  The credit facility
provides  Whitehall with rights of  acceleration  upon the occurrence of certain
customary events of default.  The Company is restricted from paying dividends on
its Common Stock,  retiring or  repurchasing  its Common Stock and entering into
additional indebtedness (as defined).

Pursuant to the new credit  facility,  the Company cannot exceed certain advance
rates on eligible  inventory  and must  maintain  certain  monthly and quarterly
levels of  earnings  before  interest,  taxes,  depreciation  and  amortization.
Additionally,   the  Company's  annual  capital  expenditures  cannot  exceed  a
predetermined amount.

As the new credit  facility  expires in five years and does not  include  both a
subjective  acceleration  clause and a lock box arrangement,  in accordance with
EITF 95-22, the Company classified the balance outstanding,  at November 1, 2003
($2,726,000), under the new credit facility as a long-term liability.

3. Stock-Based Compensation

Stock Option Plan

The  Company's  Board  of  Directors  and   shareholders   approved  the  Harvey
Electronics,  Inc.  Stock Option Plan ("Stock  Option Plan") in fiscal 1998. The
Stock  Option  Plan  provides  for the  granting  of up to  1,000,000  shares of
incentive and non-qualified  Common Stock options and stock appreciation  rights
to directors,  officers and employees.  All options are  exercisable at times as
determined  by the Board of  Directors  not to exceed ten years from the date of
grant.

Common equivalent shares relating to stock options aggregating 38,970 and 88,476
were included in the weighted  average number of common shares  outstanding  for
the  diluted  earnings  per share  computation  for fiscal  years 2003 and 2002.
Common equivalent shares for fiscal 2001 were not included,  as their effect was
antidilutive.

In fiscal 2003, no stock options were granted.

In fiscal 2002, the Company's  Compensation and Stock Option Committee  approved
two grants of  incentive  stock  options  aggregating  205,000 to the  Company's
officers to purchase the Company's  Common Stock at exercise prices from $1.15 -
$1.35 per  share.  The fiscal  2002  incentive  stock  options  are  exercisable
immediately.

In fiscal 2001, the Company's  Compensation and Stock Option Committee  approved
three grants of incentive stock options  aggregating  262,500,  to the Company's
officers  and outside  directors,  to purchase  the  Company's  Common  Stock at
exercise prices from  $.8125-$1.375  per share.  The fiscal 2001 incentive stock
options are  exercisable  immediately.

In fiscal years 2002 and 2001, the Company granted 197,500 and 262,500 shares of
Common Stock,  respectively,  for issuance in connection with stock options. The
following  table  summarizes  activity in stock options during fiscal 2003, 2002
and 2001:

<TABLE>
<CAPTION>

                                                                                             Weighted-
                                              Shares            Shares Under Option           Average
                                                          --------------------------------
                                          Available for     Option Price      Number of       Exercise
                                             Granting        per Share         Shares          Price
                                          --------------- ----------------- -------------- ---------------
<S>                                           <C>          <C>                  <C>            <C>
   Balance at October 28, 2000                15,050                            524,950        $1.68
      2001 Stock option grants               262,500
      Granted--November 29, 2000             (45,000)          $1.375            45,000        $1.375
      Granted--December 28, 2000            (102,500)      $.8125-$.8937        102,500       $  .82
      Granted--March 12, 2001               (115,000)      $.9375-$1.0313       115,000       $  .96
      Forfeited                                2,175        $1.00-$3.00          (2,175)       $2.13
                                          ---------------                   --------------
    Balance at October 27, 2001               17,225                            785,275        $1.44
      2002 Stock option grants               197,500
      Granted - March 5, 2002               (115,000)       $1.15-$1.265        115,000        $1.175
      Granted - May 30, 2002                 (90,000)          $1.35             90,000        $1.35
      Forfeited                                1,175        $1.00-$2.00          (1,175)       $1.574
                                          ---------------                   --------------
     Balance at October 26, 2002              10,900                            989,100        $1.416
   2003 Stock option grants                        -               -                 -              -
      Granted                                      -               -                 -              -
      Forfeited                                    -               -                 -              -
                                          ---------------                   --------------
     Balance at November 1, 2003              10,900                            989,100        $1.416
                                              ======                            =======
</TABLE>

At November 1, 2003,  October 26,  2002 and October 27,  2001,  all  outstanding
options are  exercisable.  The  weighted-average  fair value of options  granted
during the fiscal  years  ended  October 26, 2002 and October 27, 2001 was $1.11
and $.76, respectively.


Exercise prices for options outstanding as of November 1, 2003, are as follows:
<TABLE>
<CAPTION>

                                 Number of                                 Weighted-Average
                                  Options               Options                Remaining
                              Outstanding at         Exercisable at        Contractual Life
    Exercise Price               Year End             End of Year              in Years
------------------------ ---------------------- ---------------------- ----------------------
        <S>                       <C>                    <C>                       <C>
        $.8125                    90,000                 90,000                    8
        $.8937                    12,500                 12,500                    8
        $.9375                    90,000                 90,000                    8
         $1.00                    62,625                 62,625                    5
        $1.0313                   25,000                 25,000                    8
         $1.15                    90,000                 90,000                    9
        $1.265                    25,000                 25,000                    4
         $1.35                    90,000                 90,000                    9
        $1.375                    45,000                 45,000                    8
         $1.50                   222,500                222,500                    6
         $1.75                   102,500                102,500                    7
         $1.86                    57,500                 57,500                    7
        $1.925                    12,500                 12,500                    7
         $2.00                     4,975                  4,975                    4
         $3.00                    59,000                 59,000                    4
                         ---------------------- ----------------------
                                 989,100                989,100                    7
                         ====================== ======================
</TABLE>

At November 1, 2003 and October 26,  2002,  the Company has  reserved  shares of
Common Stock for issuance  under Common Stock  options,  warrants and  preferred
stock of approximately 1,019,000 and 3,780,000, respectively.

4.  8.5% Cumulative Convertible Preferred Stock

The  Company's  Preferred  Stock has no voting  rights and is  redeemable at the
option of the Company's  Board of Directors,  in whole or in part, at face value
plus  any  accrued  dividends.  The  carrying  value of the  Preferred  Stock is
$379,982 at November 1, 2003 and October 26, 2002.

In the event of liquidation of the Company,  the holders of the Preferred  Stock
shall receive  preferential rights and shall be entitled to receive an aggregate
liquidation preference of $827,000 plus any outstanding dividends,  prior to any
distributions to common  shareholders.  The holders of the Preferred Stock shall
receive  a  semiannual  8.5%  cumulative  dividend  ($85 per  share  or  $70,295
annually), payable on the last business day in June and December.

Commencing on January 1, 2001, the Preferred  Stock is convertible at $1.2333 or
709,479 shares of Common Stock (calculated from the average closing price of the
Company's Common Stock for the preceding  45-day trading period).  875 shares of
Preferred Stock were originally  issued by the Company.  In June 2002, 48 shares
of Preferred Stock were converted to 38,920 shares of the Company's Common Stock
by a preferred shareholder. At November 1, 2003 and October 26, 2002, 827 shares
of  Preferred  Stock  were  issued  and  outstanding.  The  Company's  remaining
Preferred Stock is convertible into 670,559 shares of Common Stock.

Cumulative  Preferred  Stock  dividends  payable of $23,432 are  outstanding and
classified as a current liability at both November 1, 2003 and October 26, 2002.
Dividends aggregating $70,295,  $72,777 and $74,376 were recorded as a charge to
accumulated deficit in fiscal years 2003, 2002 and 2001, respectively.

5. Income Taxes

Fresh Start  Accounting  requires the Company to report an income tax equivalent
provision  when  there  is book  taxable  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 would eliminate (or
reduce)  the related  income tax  payable.  The current and future year  benefit
related to the  carryforward  is not  reflected  in net  income,  but instead is
recorded as an adjustment to reorganization value in excess of amounts allocable
to identifiable  assets.  During the year ended November 1, 2003 and October 26,
2002, the Company  recorded an income tax  equivalent  provision of $195,000 and
$124,000,  respectively,  and reduced  Reorganization Value in Excess of Amounts
Allowable  to  Identifiable  Assets by the same  amount.  There was no provision
(benefit)  for income taxes during the year ended  October 27, 2001.  The income
tax equivalent provisions did not materially affect the Company's tax liability.

The provision for income taxes for the years ended November 1, 2003, October 26,
2002, and October 27, 2001 consists of the following:
<TABLE>
<CAPTION>
                             November 1, 2003     October 26, 2002     October 27, 2001
                             ----------------     ----------------     ----------------
Current:
<S>                         <C>                   <C>                  <C>
Federal                     $      -              $       -            $        -
State                              -                      -                     -
Equivalent tax expense          195,000                124,000                  -
                             ----------------     ----------------     ----------------
                                195,000                124,000                  -
Deferred                           -                      -                     -
                             ----------------     ----------------     ----------------
                               $195,000               $124,000          $       -
                            =================     ================     ================
</TABLE>


The  effective  income tax rate  differed  from the  Federal  statutory  rate as
follows:
<TABLE>
<CAPTION>
                                               Year Ended                   Year Ended                 Year Ended
                                            November 1, 2003             October 26, 2002          October 27, 2001
                                        ------------- ------------- -------------- ----------- ------------- ----------
                                           Amount          %          Amount           %          Amount         %
                                        ------------- ------------- -------------- ----------- ------------- ----------
Federal income tax provision
<S>                                       <C>           <C>          <C>            <C>         <C>           <C>
   (benefit) at statutory rate            $164,000      34.0%        $104,000       34.0%       $(425,000)    (34.0%)
State income taxes, net of Federal
   benefit                                  33,000       6.8           23,000        7.6          (55,000)     (4.4)
Nondeductible reorganization
   amortization                               -           -            18,000        5.9           20,000       1.6
Operating losses not currently
   deductible                                 -           -              -            -           453,000      36.2
Other, net                                   9,000       1.9            5,000        1.6            7,000        .6
Benefit from post reorganization
   temporary differences on tax
   equivalent provision                    (11,000)     (2.3)         (26,000)      (8.3)            -           -
                                        ------------- ------------- -------------- ----------- ------------- ----------
                                        ------------- ------------- -------------- ----------- ------------- ----------
                                          $195,000      40.4%        $124,000       40.8%       $0            0%
                                          ========      =====        ========       =====       ==            ==
</TABLE>


The Company has deferred tax assets and deferred tax liabilities as presented in
the table  below.  The net  deferred  tax  assets  are  subject  to a  valuation
allowance,  which was  approximately  $1,570,000 and $1,758,000,  at November 1,
2003 and October 26, 2002, respectively.

Deferred tax assets and liabilities as of November 1, 2003 and October 26, 2002,
prior to the allocation of the valuation allowance consisted of the following:
<TABLE>
<CAPTION>

                                                                      November 1,      October 26,
                                                                         2003             2002
                                                                    ---------------- ----------------
<S>                                                                  <C>                <C>
Pre-reorganization net operating loss carryforwards                  $      181,000     $ 352,000
Pre-reorganization deductible temporary differences                          74,000        74,000
Pre-reorganization tax credits                                               53,000        53,000
Post-reorganization net operating loss carryforwards                        691,000       981,000
Deferred rent                                                                51,000        16,000
Expenses not currently deductible                                             4,000          -
Inventories                                                                  84,000        75,000
Depreciable assets                                                          456,000       262,000
Tax credits                                                                   2,000         2,000
                                                                    ---------------- ----------------
Total deferred tax assets                                                 1,596,000     1,815,000
                                                                    ---------------- ----------------

Website development costs                                                   (15,000)      (50,000)
Intangible assets                                                           (11,000)       (7,000)
                                                                    ---------------- ----------------
Total deferred tax liabilities                                              (26,000)      (57,000)
                                                                    ---------------- ----------------
Net                                                                       1,570,000     1,758,000

Valuation allowance                                                       1,570,000     1,758,000
                                                                          =========     =========
Total                                                                    $        0    $        0
                                                                         ==========     =========
</TABLE>

At November 1, 2003, the Company has available net operating loss  carryforwards
of approximately $2,200,000,  which expire in various years through fiscal 2019.
Of  this  amount,  approximately  $500,000  relates  to  pre-reorganization  net
operating loss carryforwards. Under section 382 of the IRS code, it is estimated
that  these  pre-reorganization  net  operating  loss  carryforwards  and  other
pre-reorganization  tax attributes will be limited to approximately $150,000 per
year. A full valuation allowance has been provided on the net deferred tax asset
due to uncertainty regarding the future utilization of the deferred tax assets.

6. Pension and Profit Sharing Plan

The Company maintains the Harvey  Electronics,  Inc. Savings and Investment Plan
(the "Plan") which includes  profit  sharing,  defined  contribution  and 401(k)
provisions and is available to all eligible employees of the Company. There were
no employer contributions to the Plan for fiscal 2003, 2002 and 2001.


7. Commitments and Contingencies

Commitments

The Company's  financial  statements reflect the accounting for equipment leases
as capital leases by recording the asset and the related liability for the lease
obligation.  Capital  lease  additions  of  approximately  $0 and  $99,000  were
recorded  during fiscal 2003 and 2002,  respectively.  The Company leases stores
and warehouse  facilities  under  operating  leases,  which provide,  in certain
cases,  for payment of additional  rentals based on a percentage of sales over a
fixed amount.  Future minimum rental commitments,  by year and in the aggregate,
for equipment under capital and  noncancelable  operating leases with initial or
remaining  terms of one-year or more  consisted of the  following at November 1,
2003:
<TABLE>
<CAPTION>

                                                   Operating Leases          Capital
                                                                             Leases
                                                 --------------------- --------------------
<S>    <C>                                       <C>                       <C>      <C>
Fiscal 2004                                      $   2,337,000             $       -0-
Fiscal 2005                                            2,109,000                    -
Fiscal 2006                                            1,439,000                    -
Fiscal 2007                                              902,000                    -
Fiscal 2008                                              663,000                    -
Thereafter                                             3,116,000                    -
                                                                       --------------------
                                                 ---------------------
Total minimum lease payments                     $ 10,566,000                       -
                                                 =====================
Less amount representing interest                                                   -
                                                                       --------------------
Present value of net minimum lease payments                                         -
Less current portion                                                                -
                                                                       --------------------
                                                                           $       -0-
                                                                       ====================
</TABLE>

Total  rental  expense  for  operating  leases  was  approximately   $3,022,000,
$2,783,000 and $2,535,000  for fiscal years 2003,  2002 and 2001,  respectively.
Certain  leases  provide  for the  payment of  insurance,  maintenance  charges,
electric and taxes and contain renewal options.

Contingencies

The Company is a party in certain legal actions which arose in the normal course
of business.  The outcome of these legal actions,  in the opinion of management,
will not have a material effect on the Company's financial position,  results of
operations or liquidity.

In July 2003,  the Company  received a notice and  information  request from the
Pennsylvania Department of Environmental Protection ("PADEP"). The notice stated
that  PADEP   considers  the  Company  a  potentially   responsible   party  for
contamination  related to a septic  drain  field  located  at a former  Chem Fab
Corporation ("Chem Fab") site in Doylestown, Pennsylvania.

PADEP's  notice  stated that if Chem Fab was  previously  owned by Harvey Radio,
Inc.  ("Harvey Radio") and if the Company was a successor to Harvey Radio,  then
the Company could be, in part,  responsible for any environmental  investigation
or clean up actions necessary at this site.

Harvey Radio was the  predecessor of The Harvey Group,  Inc.  ("Harvey  Group"),
which filed for relief under Chapter 11 of the United States  Bankruptcy Code in
August 1995. The Company is the surviving  retail  business of the Harvey Group,
which emerged from  bankruptcy  in December  1996.  Chem Fab was a  wholly-owned
subsidiary of Harvey Radio as of September  1967.  The capital stock of Chem Fab
(a then wholly-owned  subsidiary of Harvey Group) was sold by the Company to the
Boarhead  Corporation in January 1978. The  disposition of Chem Fab was prior in
time to the Company's bankruptcy petition date of August 3, 1995.

On August 29, 2003, the Company sent its response letter to PADEP. The Company's
response  stated  that any action by PADEP to recover any money from the Company
relating to any environmental investigation or cleanup related to Chem Fab is in
violation of the injunctions  imposed by virtue of the Company's 1995 Bankruptcy
proceeding. The response letter to PADEP specifically referred to two cases with
respect to  entities  subject  to a  discharge  in  bankruptcy  by the  Southern
District of New York and the Second  Circuit  Court of Appeals.  These cases may
support the Company's position enjoining any further action against the Company.

The Company believes PADEP's claim, even absent the bankruptcy injunction, would
be improper  against the Company,  as Harvey Group was a shareholder of Chem Fab
and Chem Fab's capital stock was sold in 1978, as previously stated.

The Company  advised PADEP that any further action to pursue a claim against the
Company would result in the Company  bringing a motion to reopen its  bankruptcy
case, solely to address the PADEP claim and further,  the Company would commence
contempt proceedings against PADEP. The Company is awaiting PADEP's response.

The Company has also retained  special  Pennsylvania  environmental  counsel for
advice with respect to PADEP's  request for  information  and other matters with
respect to the claim.

Furthermore, the number of other parties that may be responsible,  their ability
to share in the cost of a clean up and whether the  Company's  existing or prior
insurance  policies provide coverage for this matter is not known. At this time,
it is impossible for the Company to determine the outcome or cost to the Company
relating to this matter. F-24 8. Other Information

Accrued Expenses and Other Current Liabilities
<TABLE>
<CAPTION>
                                                   November 1,                 October 26,
                                                      2003                         2002
                                           ---------------------------- ---------------------------
<S>                                                 <C>                         <C>
Payroll and payroll related items                   $ 390,000                   $ 496,000
Accrued professional fees                             172,000                     116,000
Sales taxes                                           170,000                     170,000
Accrued occupancy                                     206,000                     213,000
Accrued bonuses                                       267,000                     167,000
Other                                                 105,000                     131,000
                                           ---------------------------- ---------------------------
                                                  $ 1,310,000                 $ 1,293,000
                                                  ===========                 ===========
</TABLE>

Consulting Agreements

In fiscal  2001,  the Company  engaged  Mesa  Partners,  Inc.  ("Mesa")  under a
consulting  agreement.  Mesa was engaged to provide consulting services relating
to the integration of computer networks, entertainment systems and other related
services.  In connection with the consulting  agreement with Mesa, and a related
addendum,  the  Company  issued a  warrant  to  purchase  15,000  shares  of the
Company's Common Stock,  exercisable at any time at $3.00 per share. The warrant
has a  three-year  term and was  issued as  partial  compensation  for  services
rendered  by Mesa.  The fair value of the  warrant of  approximately  $8,000 was
recorded in fiscal 2001 as the Company  elected to terminate  this  agreement in
fiscal 2001. Additionally, as was required by the consulting agreement, Mesa was
paid a fee of $20,000 a month  plus  related  expenses.  For  fiscal  2001,  the
Company recorded consulting fees of approximately $70,000 relating to Mesa.

Investor Relations Advisor

In fiscal  2001,  the  Company  engaged  Porter,  LeVay & Rose  ("PL&R")  as its
investor  relations  advisor.  In connection with the agreement,  the Company is
required  to and issued a warrant to  purchase  60,000  shares of the  Company's
Common Stock,  exercisable  immediately at various  exercise prices ranging from
$1.25-$2.50.  The warrant's fair value of approximately $15,000 was amortized to
expense ($5,000 in fiscal 2002 and $10,000 in fiscal 2001). In June 2002, 15,000
warrants to purchase the Company's  Common Stock were exchanged for 2,772 shares
of Common Stock, effected under a cash-less exercise, by PL&R. Additionally, the
Company  paid PL&R a $5,000  monthly  fee for its  services.  For the year ended
October 27, 2001, the Company recorded an investor relations expense of $54,000,
relating to PL&R. This agreement was terminated in 2001.


Union Contract

The Company is party to a  collective  bargaining  agreement  with a union which
covers  certain  sales,  warehouse and  installation  employees.  This agreement
expires on August 1, 2004.

Other

In January 2004,  the Company  agreed to satisfy  certain long  outstanding  and
disputed tax claims  ($52,000)  under an amnesty  program offered by the City of
New York. The tax claims related to a prior subsidiary for fiscal years 1987 and
1988.  The Company  satisfied  the claim,  in full,  paying  $90,000  (including
interest),  under the amnesty program.  The Company recorded $50,000 to Selling,
General and  Administrative  expenses in fiscal  2003  relating to this  matter.
Prior to the settlement of this matter,  the Company had recorded a liability of
$40,000 relating to this claim.


A Director of the Company also is a Senior  Partner in a law firm  providing the
Company  with legal  services.  At November 1, 2003 and  October 26,  2002,  the
Company had $50,000 and  $26,000,  respectively,  payable to this law firm.  The
Company paid legal fees to this law firm of approximately  $95,000,  $81,000 and
$64,000 in fiscal years 2003, 2002 and 2001, respectively.

9. Retail Store Expansion

During  fiscal year 2000,  the Company  entered into a ten-year  lease for a new
6,500  square foot  Harvey  showroom in  Eatontown,  New Jersey.  This new store
opened in April 2001. Since this time, results of operations from this new store
have been included in the Company's results of operations.  Pre-opening expenses
have been  included in the Company's  results of  operations  for the year ended
October 27,  2001.  This is the  Company's  ninth store and is the fifth  opened
since its public offering, completed in April 1998.


10. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>

                                                                        Net Income (Loss)
                                                                      Applicable to Common
2003                          Net Sales            Gross Profit               Stock              Basic EPS         Diluted EPS
----------------------- ---------------------- ---------------------- ---------------------- ------------------ ------------------
<S>                           <C>                     <C>                      <C>                  <C>                <C>
First quarter                 $13,141,796             $5,274,324               $403,069             $0.12              $0.10
Second quarter                 10,000,140              3,990,992               ( 66,210)            (0.02)             (0.02)
Third quarter                  10,068,045              4,145,463                 (4,171)             -                  -
Fourth quarter                  9,238,235              3,896,951               (115,942)            (0.03)             (0.02)
2002
----------------------- ---------------------- ---------------------- ---------------------- ------------------ ------------------
First quarter                 $12,420,559             $4,880,360               $371,854             $0.11              $0.09
Second quarter                 10,363,725              4,110,488                 72,015              0.02               0.02
Third quarter                   9,583,471              3,789,013                (98,947)            (0.03)             (0.03)
Fourth quarter                  9,138,822              3,573,447               (237,228)            (0.07)             (0.07)
</TABLE>





                 Schedule II - Valuation and Qualifying Accounts

                            Harvey Electronics, Inc.
<TABLE>
<CAPTION>
----------------------------------------- ---------------------- ----------------------------------- -------------------------------
COL. A                                    COL. B                 COL. C                              COL. D               COL. E
----------------------------------------- ---------------------- ----------------------------------- -------------------------------
Description                               Balance at beginning   Additions charged Charged to other  Other changes - add  Balance at
                                          of period              to costs and      accounts -        (deduct) - describe  end of
                                                                 expenses          describe                               period
----------------------------------------- ---------------------- ----------------- ----------------- -------------------------------

Fiscal year ended November 1, 2003
Reserves and allowances
    deducted from asset accounts:
<S>                                       <C>                    <C>                                 <C>       <C>        <C>
         Allowance for doubtful accounts  $20,000                $18,646                             $(18,646) (1)        $20,000

Fiscal year ended October 26, 2002
Reserves and allowances
    deducted from asset accounts:
         Allowance for doubtful accounts  $25,000                $18,627                             $(23,627) (1)        $20,000

Fiscal year ended October 27, 2001
Reserves and allowances
    deducted from asset accounts:
         Allowance for doubtful accounts  $25,000                $25,098                             $(25,098) (1)        $25,000

<FN>
(1) Uncollectible accounts written off, net of recoveries.
</FN>
</TABLE>

               Report of Independent Certified Public Accountants



The Board of Directors and Shareholders
Harvey Electronics, Inc.


The audit  referred to in our report  dated  December  23, 2003  relating to the
financial  statements  of Harvey  Electronics,  Inc.  included  the audit of the
financial  statement  Schedule II - Valuation  and  Qualifying  Accounts for the
two-year period ended November 1, 2003. The financial  statement schedule is the
responsibility of the Company's management.  Our responsibility is to express an
opinion on this financial statement schedule based on our audits.

In our opinion,  such  financial  statement  schedule  presents  fairly,  in all
material respects, the information set forth therein.



/s/ BDO Seidman, LLP
--------------------

BDO Seidman, LLP
Melville, New York
December 23, 2003