UNITED STATES


                       SECURITIES AND EXCHANGE COMMISSION


                             Washington, D.C. 20549
                                   FORM 10-KSB

                X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 1, 1997


               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. (formerly The Harvey Group Inc. and Subsidiaries)
              (Exact name of Small Business Issuer in its charter)

For the fiscal year ended November 1, 1997

               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. (formerly The Harvey Group Inc. and Subsidiaries)
              (Exact name of Small Business Issuer in its charter)

          New York                                    13-1534671
(State or other jurisdiction                      (I.R.S. Employer 
 of incorporation or organization)                 Identification No.)

                 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)

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B is contained  in this form,  and no  disclosure  will 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-KSB
or any amendment to this Form 10-KSB. [ ]

     Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes [X] No [ ]


     State issuer's revenues for its most recent fiscal year. $15,470,942

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of January 28, 1998. 2,257,833

     As of January 28, 1998,  the  aggregate  market  value of the  registrant's
common  stock was not  determinable.  The shares are not  currently  traded on a
public market.






<PAGE>








                            Harvey Electronics, Inc.

                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)


                                     Part I


     Item 1. Description of Business.


     General

     Harvey Electronics,  Inc. 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,   video  cassette
recorders  ("VCR"),  digital  versatile  disc players  ("DVD"),  direct view and
projection television sets,  audio/video  furniture,  digital satellite systems,
conventional telephones and related accessories. The Company has been engaged in
this business in the New York  Metropolitan  area for seventy years. The Company
currently  operates four retail stores.  The two Manhattan stores are located on
Broadway at 19th Street and on 45th Street at Fifth Avenue. Its other two stores
are  located on Route 17 in  Paramus,  New Jersey and on West  Putnam  Avenue in
Greenwich, Connecticut.

     The  Company's  stores are  designed to offer an  attractive  and  pleasing
environment  and to display its products 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.


     Bankruptcy Proceeding and Reorganization

     On August 3, 1995, the Company (then known as The Harvey Group Inc. and its
subsidiaries)  filed  petitions for relief under Chapter 11 of the United States
Bankruptcy Code with the Bankruptcy Court for the Southern  District of New York
(the "Court").  This filing was the result of certain factors  including but not
limited to: (i) the negative effect of a $2,138,000 judgment entered against the
Company;   (ii)  liabilities   arising  from  The  Harvey  Group  Inc.  and  its
discontinued  food  brokerage  division,  which  remained as  liabilities of the
Company, the payment of which significantly reduced cash; (iii) the recession of
the early 1990's coupled with a soft market in the electronics industry,  all of
which resulted in losses and a shortage of cash flow; and (iv) the delisting (in
June,  1995) of the  Company's  Common Stock from the American  Stock  Exchange,
which delisting rendered a proposed $4.2 million equity placement untenable.

     On November 13, 1996,  the Court  confirmed  the  Company's  Reorganization
Plan. The Effective date of the  Reorganization  Plan was December 26, 1996 (the
"Effective Date of Plan"), at which time the Company emerged from its Chapter 11
reorganization.  At that time,  Harvey Sound,  Inc.,  the Company's  subsidiary,
merged into the Harvey  Group Inc.,  and the merged  entity  changed its name to
Harvey Electronics, Inc.

     Pursuant to the Reorganization  Plan, as of the Effective Date of Plan, all
of the shares of common and preferred  stock of the Company were  canceled.  The
Company  amended its Restated  Certificate of  Incorporation  to authorize,  for
issuance,  10,010,000 shares of capital stock as follows: (a) 10,000 shares of 8
1/2%  Cumulative  Convertible  Preferred  Stock  with a par value of $1,000  per
share;  and (b)  10,000,000  shares of Common Stock with a par value of $.01 per
share. See "Description of Securities."

     The  Reorganization  Plan also provided for the  distribution of the Common
Stock of the  reorganized  Company as follows:  (a)  2,000,000  shares to Harvey
Acquisition   Company,   L.L.C.   ("HAC")  in   satisfaction  of  $2,822,500  of
subordinated  secured  financing  provided to the Company  during its bankruptcy
proceeding;   (b)  186,306  shares  to  the  Company's  unsecured  creditors  in
satisfaction  of the Company's  pre-petition  obligations  owed to its unsecured
creditors;  (c) 19,962  shares to the  Company's  former  shareholders;  and (d)
51,565  shares  to  InterEquity  Capital  Partners,  L.P.   ("InterEquity"),   a
pre-bankruptcy subordinated secured creditor, in satisfaction of a Court allowed
finder's fee.

     Prepetition amounts from the subordinated secured debtholders,  InterEquity
($600,000) and four  individuals  who purchased the  indebtedness  from National
Westminster  Bank,  USA  ($275,000),  were exchanged for 875 shares of Preferred
Stock, in accordance with the Reorganization Plan.

     Other  significant  provisions of the  Reorganization  Plan  included:  (a)
changing the close of the Company's fiscal year end from the Saturday nearest to
January 31 to the  Saturday  nearest to October 31; and (b)  adoption of a stock
option plan ("Stock Option Plan"),  whereby  options to purchase up to 1,000,000
shares of Common Stock are authorized.


     Proposed Public Offering

     On  September  15,  1997,  the  Company  signed a letter of intent  with an
underwriter  to sell common  stock and  warrants to purchase  common  stock in a
public  offering (the  "Offering").  The  underwriter  proposes to co-manage and
underwrite  an  offering of 850,000  shares of the  Company's  common  stock and
1,300,000 of warrants ("Warrants") to acquire additional shares of Common Stock.
The net proceeds from the Offering  will be used for retail store  expansion and
working capital purposes.

     On December 12, 1997,  the Company filed a  registration  statement on Form
SB-2 under Commission File #333-42121 with respect to the Offering.

     Each Warrant shall be exercisable  for one share of common stock at 110% of
the public offering price, for a period of three years commencing two years from
the effective  date of the  Offering.  The Warrants  also are  redeemable  (at a
prescribed price) at the Company's option, two years after the effective date of
the Offering ("Effective Date") if the closing bid price of the common stock for
20 consecutive trading days exceeds 150% of the public offering price per share.

     At the  underwriter's  election,  it may  underwrite an additional  127,500
shares and/or 195,000 Warrants if market conditions  permit. The first 27,500 of
such shares would be sold by the Company and any additional  shares will be sold
by HAC with the proceeds to be received by HAC.

     The letter of intent  provides that as compensation  for the Offering,  the
underwriters  will  receive  a  10%  commission;  a 3%  non-accountable  expense
allowance  and  Warrants  for 10% of the  number of  shares of common  stock and
Warrants sold to the public.  These  Warrants shall be  non-exercisable  for one
year  following  the Effective  Date and will be  exercisable  thereafter  for a
period of five years at 120% of the initial public offering price. The letter of
intent  also  provides  for the  Company to pay  $87,600  at the  closing of the
Offering,  which represents consulting fees to the underwriters for a three year
period  commencing on the Effective  Date.  The  underwriters  also will,  for a
period  of three  years,  engage  two  designees  as  advisors  to the  Board of
Directors. Underwriting compensation is presently in negotiation.

     The Offering is subject to certain conditions,  as defined in the letter of
intent. There can be no assurance that this proposed offering will be completed.


     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 and Olufsen, Marantz, McIntosh, Meridian and Adcom,
whose products the Company has sold for a number of years.  The Company believes
that it benefits from strong working relationships with these manufacturers.

     For the  fifty-three  weeks ended  November 1, 1997,  the  Company's  audio
product  sales  represented  approximately  74% of the  Company's  net sales and
yielded gross profit margins of  approximately  38%. The Company's video product
sales represented approximately 23% of the Company's net sales and yielded gross
profit  margins  of   approximately   23%.  The  Company  also  provides  custom
installation  of  products  it sells.  Approximately  17% of net  product  sales
currently involve custom installation.  The labor portion of custom installation
presently  represents  approximately  3% of net sales.  The  Company  also sells
extended  warranties  on  behalf of third  party  providers.  Sales of  extended
warranties which yield a gross profit margin in excess of 50%, represent between
1% and 2% 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,  blank
audio and videotapes and projection screens. The miscellaneous category includes
conventional telephones, answering machines, radios and other portable products.

                                      


<PAGE>



                            Harvey Electronics, Inc.

                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)

<TABLE>
<CAPTION>

                                          Fifty-Three        Thirty-Nine Week s Ended   Fifty-Two
                                          Weeks Ended            October 26,           Weeks Ended
                                          November 1,               1996               January 27,
                                              1997                                         1996
                                    ------------------------------------------------------------
<S>                                  <C>                       <C>                 <C>   


Audio Components                      53%                    51%                   53%
Mini Audio Shelf Systems              6                      7                     8
TV and Projectors                     16                     18                    16
VCR/DVD/DSS                           6                      5                     6
Furniture                             4                      5                     5
Cable and Wire                        5                      4                     4
Accessories                           6                      4                     3
Extended Warranties                   1                      2                     2
Miscellaneous                         3                      4                     3
                                    ------------------------------------------------------------
                                      100%                   100%                  100%
                                    ============================================================
</TABLE>


     The percentage of sales by each product category is affected by 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.  Three
new technologies,  DVD, flat screen television,  and high definition television,
have recently  been,  or will shortly be,  introduced.  The DVD player  provides
enhanced  picture and sound quality in a format far more  convenient and durable
than  videotape.  The flat screen  television  expected to be introduced in 1998
allows a 40 inch  television  to be only six  inches  from  front to back.  This
allows the set to be far less  obtrusive and more easily  integratable  into the
home. High definition  television,  which is expected to  significantly  improve
picture quality, is expected to be introduced in the next year or two.

     The Company intends to continue its recent emphasis on custom  installation
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.  For example,  rather than
just selling a television with an approximate gross profit margin of 23%, custom
installation  enables  the  Company to sell to the same  customer  speakers at a
margin exceeding 40%, accessories at a margin approximating 50% and installation
labor with margins of over 60%.

     Custom installation projects frequently expand on-site, based on customers'
desires during the installation. 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 not only because it may not be available at mass merchants, but also
because  custom   installation   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.  The recent  introduction  of DVD players and
advanced  televisions,   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 56% of the Company's  purchases for the
fifty-three  weeks ended November 1, 1997.  These ten  manufacturers  are Adcom,
Bang & Olufsen, KEF, Marantz,  McIntosh,  Meridian,  Mitsubishi,  Monster Cable,
Pioneer Elite and Sony. No individual  manufacturer  accounted for more than 10%
of the Company's purchases for the forty weeks ended November 1, 1997, but Sony,
Bang & Olufsen,  Marantz,  Mitsubishi  and Pioneer Elite each accounted for more
than five (5%) percent of purchases for such period.

     The Company has entered into substantially identical dealer agreements with
each of Marantz  America,  Inc.,  Audio Control,  Sony,  Cinemapro  Corporation,
Mitsubishi  Electronics  America,  Inc., Lenbrook America, LLC (a distributor of
KEF products), Pioneer Electronics (USA), Inc., NAD Electronics of America, Bang
& Olufsen of America, Inc., and Niles Audio Corporation,  Inc. 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
product could have an adverse impact on the Company.  The loss of Bang & Olufsen
as a supplier  to the Company  would have a  significant  adverse  effect to the
Company because of the uniqueness of Bang & Olufsen's products.

     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  additional
manufacturers'  rebates based on volume buying levels. On occasion,  the Company
has been able to negotiate favorable terms on larger purchases, such as extended
payment terms, additional cooperative advertising contributions or lower prices,
particularly  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 5,500 sq. ft. 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 equipment.

     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's inventory turnover for the fifty-three week period
ended November 1, 1997, was  approximately  2.9 times.  The Company has begun to
formulate a plan with its  software  and  service  provider to address the risks
associated  with the  year  2000  computer  issue as it  affects  the  Company's
management  information  system,  the  cost  of  which  is  not  expected  to be
significant.


     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 card is issued by an unrelated  finance company,  without recourse
to the  Company.  The  Company  also  periodically,  as part of its  promotional
activities, makes manufacturer, (i.e. Mitsubishi), sponsored financing available
to its  customers.  Generally,  the  cost of such  financing  is paid for by the
Company, but manufacturers  periodically participate with, and contribute to the
Company in financing these promotions.

     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 at least one in-home
audio/video specialist 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.  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 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 extended warranty contract 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.  The  warranty  obligation  is solely  the
responsibility of the insurance company.


     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
mass  merchandise.  These  retailers  operate on narrow profit  margins and high
volume,  driven  by  aggressive   advertising   emphasizing  low  prices.  While
nationwide  industry leaders are Circuit City and Best Buys, the New York region
has been dominated by local chains  including P.C.  Richard & Son,  Nobody Beats
the Wiz, J&R Music World and Tops Appliance. There is likely to be a significant
change in the  local  environment  inasmuch  as  Circuit  City has begun to open
stores in the New York market.

     Many of the  competitors  sell a  broader  range  of  electronic  products,
including computers, camcorder 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 by offering  services such as custom
installations which are not generally offered by the mass merchants.

     Very few, if any, of the audio  products  sold by the  Company,  other than
radios and other portable products, are available at the mass merchants.  Of the
major video  products sold by the Company,  generally  only Sony and  Mitsubishi
televisions are sold by the mass merchants.

     The Company seeks to reinforce its  positioning  by displaying its products
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.


     Advertising

     During the late  1980's and early  1990's,  the Company  introduced  lesser
quality product lines to become more price competitive.  This strategy placed it
in direct competition with mass merchants. This strategy sent a mixed message to
the  traditional  customers of the Company.  Commencing in late 1995 the Company
refocused its operations by returning to its traditional marketing strategy.

     The Company now uses smaller,  but more frequent  advertising,  emphasizing
image,  products,  and  technology in the New York Times,  Wall Street  Journal,
Village Voice, and New York Magazine.  The Company also distributes  direct mail
advertising several times a year to reach its customer database of over 100,000.
Some of the direct mail promotions are for specific manufacturers,  products, or
technology, and are supported by the manufacturers.

     Both the print and direct mail  advertising  consistently  offer attractive
financing alternatives on purchases on credit without interest for six or twelve
months.  The Company also  maintains an Internet  site on the World Wide Web, at
http://www.harveyonline.com.  The site promotes the Company's  manufacturers and
their  products as well as the Company's  retail stores and custom  installation
services.

     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 market  development
funds,  cooperative  advertising and other promotional amounts received from the
manufacturers.

<TABLE>
<CAPTION>

                                                     Fifty-Three             Thirty-Nine
                                                     Weeks Ended            Week s Ended
                                                     November 1,             October 26,
                                                         1997                    1996
                                                   --------------------------------------
<S>                                                <C>                       <C>   

Gross advertising costs                              $ 1,048,000             $ 690,000

Net advertising expenses                             $   401,000             $ 358,000
Percentage of net sales                                    2.6%                   3.9%
</TABLE>


     As the Company  repositioned itself after its  reorganization,  it incurred
additional advertising expenses for the fifty-three weeks ended November 1, 1997
as compared to the  thirty-nine  weeks ended  October 26, 1996.  The Company has
retained an outside  advertising agency who is paid a monthly retainer of $9,000
plus approved expenses. This agreement expires January 31, 1999.


     Licenses and Intellectual Properties

     The Company owns two registered  service marks "HARVEY," issued on March 7,
1989,  and "THE TEMPLE OF HOME  THEATER,"  issued on May 13, 1997.  Both service
marks are registered  for  International  Class 42, which includes  retail store
services  in the field of  audio,  video,  consumer  electronics,  home  theater
products and custom installation of home theater products.  The Company believes
that its service marks have significant value and are important in marketing the
Company's products.

                                     



<PAGE>
                        

     Employees

     As of November 1, 1997,  the Company  employed  approximately  70 full-time
employees  of  which  12  were  management  personnel,  10  were  administrative
personnel, 29 were salespeople,  8 were warehouse workers and 11 were engaged in
custom installation.

     The salespeople,  warehouse workers, and installation staff (48 people) are
covered by a collective  bargaining  agreement  with the Company  which  expires
January 31,  1998.  The Company is  currently  negotiating  an extension to this
agreement.  The Company  has never  experienced  a material  work  stoppage  and
believes  that  its   relationships   with  its  employees  and  the  union  are
satisfactory.


     Item 2. Description of 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 its
proposed expansion.

     The Company leases premises at 205 Chubb Avenue,  Lyndhurst,  New Jersey, a
24,400 square foot facility,  which the Company uses as executive  offices.  The
lease expires April 30, 2001,  subject to a 5 year renewal option. The warehouse
area of 19,500 square feet of the Lyndhurst  facility was sublet in October 1997
for  approximately  $145,000 per year through April 2001. The Company  currently
leases a 5,500 square foot warehouse in Fairfield,  New Jersey at  approximately
$40,000 per year, pursuant to a lease which expires September 2002.

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

                                    Expiration Date of Lease  Renewal        Approximate Selling         Current
            Location                                          Options          Square Footage         Annual Rent
-----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                    <C>                    <C>                  <C>    

2 West 45th Street                       6/30/2005              None                  7,500                $488,000
New York, NY

556 Route 17 North                       6/30/2003              None                  7,000                $238,000
Paramus, NJ

888 Broadway at 19th St.              Month to month            None                  4,000                $180,000
New York, NY
(within ABC Carpet & Home)

19 West Putnam Ave. Greenwich, CT        9/30/2001            5 years                 5,300                $176,000

</TABLE>

     Item 3. Legal Proceedings.


     Except as set forth herein,  the Company believes that it is not a party to
any material legal  proceedings  other than those arising in the ordinary course
of business  and which are fully  covered by  insurance.  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.

     There are outstanding  disputed tax claims of  approximately  $65,000 which
were made against the Company during its Chapter 11 proceeding.  The Company has
provided reserves of $30,000 for such taxes,  penalties and interest,  which the
Company  believes to be adequate.  However,  there can be no assurance  that the
reserve will be sufficient to cover these tax claims


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

     No matters  came to a vote by the  Company's  security  holders  during the
fiscal year ended November 1, 1997.

                                     



<PAGE>


                                     Part II


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

     Shares of Common Stock of The Harvey  Group Inc.,  the  predecessor  of the
Company,  were traded on the American  Stock  Exchange  until June 16, 1995, and
were subsequently  traded on the OTC Electronic  Bulletin Board through November
1996, when such trading ceased as a result of the  confirmation of the Company's
Reorganization  Plan.  Currently,  there is no  public  trading  market  for the
Company's Securities.

     The  outstanding   shares  of  Common  Stock  are  currently  held  by  364
shareholders of record, and the Preferred Stock by five holders of record.

     The transfer  agent and  registrar  for the Common  Stock is Registrar  and
Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016.


     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 ("Preferred  Stock").  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 the November 1, 1997,  2,257,833  shares are
outstanding and held of record by 364 shareholders.

     The  holders  of  Common  Stock are  entitled  to one vote per share on all
matters  to be voted on by  stockholders.  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
therefor. 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
stockholder 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  28,  1998,  875 shares of
Preferred  Stock were issued and  outstanding  and were held by five  holders of
record.

     The  Preferred  Stock may be issued from time to time  without  stockholder
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
(the "Preference  Rate") of eighty-five  ($85) dollars per share payable in cash
on the last  business day of June and December in each year.  For calendar  year
1997, the Company has elected to defer payment of the dividends.  The Preference
Rate for calendar year 1997 is $105 per share, which will be paid in three equal
installments  with  interest at the rate of 8.5% per annum on the last  business
days of December 1998, 1999 and 2000. 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.

     Each share of  Preferred  Stock may be  convertible  into  shares of Common
Stock at the  option  of the  holder,  in whole or in part,  as  follows:  until
December 31, 2000,  (i) 50% of the Preferred  Stock will be convertible at $6.00
per share; and (ii) $7.50 per share for the balance. Commencing January 1, 2001,
the  Conversion  Price shall be equal to the average of the closing bid price of
the Common Stock over the 45 trading days preceding January 1, 2001.

     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.  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.


     General

     On November 13, 1996,  the Company  emerged from its Chapter 11  Bankruptcy
proceeding.  The Company's  Reorganization Plan provides that the Company change
its fiscal  year end from the  Saturday  closest  to January 31 to the  Saturday
closest to October 31. On October 26,  1996,  the  Company  adopted  Fresh Start
Reporting.  The  following  discussion  should be read in  conjunction  with the
Company's audited financial  statements for the fifty-three weeks ended November
1, 1997 and the  thirty-nine  week  period  ended  October 26,  1996,  appearing
elsewhere in this Form  10-KSB.  The  unaudited  financial  information  for the
fifty-two weeks ended October 26, 1996 and the  thirty-nine  weeks ended October
28, 1995 is presented for comparison purposes only.

                                  



<PAGE>

                       

Statements of Operations Data:

<TABLE>
<CAPTION>
                                              Post                    
                                           Bankruptcy Post                   Pre Bankruptcy Post
                                            Fifty-Three          Fifty-Two    Thirty-Nine           Thirty-Nine
                                           Weeks Ended        Weeks Ended     Weeks Ended           Weeks Ended
                                                            ------------------------------------------------------------
                                           November 1,       October 26,      October 26,           October 28,
                                              1997               1996            1996                   1995    
                                          ------------------------------------------------------------------------------ 
                                                              (Unaudited)                         (Unaudited)  
                                                                      (In thousands, except share data)
<S>                                       <C>                <C>                <C>               <C>      
 Net sales                                   $15,398           $14,025           $9,263            $11,107
 Cost of sales                               9,765             9,230             6,095             7,312
                                         ------------------------------------------------------------------------------
 Gross profit                                5,633             4,796             3,168             3,795
 Gross profit percentage                     36.6%             34.2%             34.2%             34.2%
 Interest expense                            325               506               356               307
 Selling, general and administrative 
    expenses                                 6,706             6,473             4,937             5,782
 Other income                                73                96                88                78
                                          ------------------------------------------------------------------------------\
 Loss before reorganization expenses,
   fresh start adjustments and              (1,325)           (2,087)           (2,037)           (2,216)
 Reorganization expenses, net                -                 (885)             (247)             (520)
 Fresh start adjustments                     -                 1,858             1,858             -
 Extraordinary gain on forgiveness
    of debt                                  -                 5,339             5,339             -                    
                                          ------------------------------------------------------------------------------
 Net (loss) income                           (1,325)           4,225             4,913             (2,736)
 Accretion of Preferred Stock                (78)              -                 -                 -
 Preferred Stock dividend requirement        (71)              -                 -                 -
                                          ------------------------------------------------------------------------------
 Net (loss) income attributable to
    Commmon Stock                         $ (1,474)         $4,225            $4,913            $(2,736)               
                                          ==============================================================================
Net (loss) income applicable to common
    Shareholders                             $(.65)            $1.33             $1.55             $(.86)         
                                          ==============================================================================
Weighted average number of common
    shares and common stock
    equivalent shares outstanding
    during the period (1)                  2,257,833                                               
</TABLE>



     (1)  Common  stock  equivalent  shares  were not  considered,  since  their
inclusion would be anti-dilutive.

                                       F-6



<PAGE>


Balance Sheet Data:
<TABLE>
<CAPTION>
                                           Unaudited
                                           Pro Forma                                  Actual
                                           November 1,        November 1,            October 26,
                                             1997(1)            1997                   1996
                                             ----------------------------------------------
                                                                      (In thousands)
     
<S>                                            <C>          <C>                       <C>    

Working capital                               $1,215          $1,215                   $1,436
Total assets                                   7,314           7,314                    7,167
Long-term liabilities                          2,364           2,364                      942
including capital leases
Total liabilities and temporary equity         5,301           5,697                    3,757
Total shareholders' equity                     2,013           1,617                    3,410
</TABLE>


     (1) The pro forma balance sheet at November 1, 1997 is presented to reflect
the Company's Preferred Stock in stockholders" equity as though the removal of a
Preferred Stock redemption  feature,  which occurred in December 1997, had taken
place on November 1, 1997.

     Fifty-Three  Weeks Ended  November 1, 1997  (Successor)  as Compared to the
Fifty-Two Weeks Ended October 26, 1996 (Unaudited--Predecessor)


     The  fiscal  year  ended  November  1, 1997 is a  fifty-three  week year as
compared to fifty-two weeks for the prior year.

     Net (Loss) Income. The net loss for the fifty-three weeks ended November 1,
1997 was  $1,325,000 as compared to net income of  $4,225,000  for the fifty-two
weeks ended October 26, 1996.  Net income for the fifty-two  weeks ended October
26, 1996,  includes an  extraordinary  gain on forgiveness of debt of $5,339,000
and the effect of certain  fresh start  adjustments  relating  to the  company's
successful   reorganization   increasing   net   income   by   $1,858,000.   Net
reorganization  expenses  relating to the  Company's  Chapter 11 process for the
fifty-two   weeks  ended  October  26,  1996  were   $885,000.   There  were  no
reorganization expenses for the fifty-three weeks ended November 1, 1997.

     Revenues.  Net sales  for the  fifty-three  weeks  ended  November  1, 1997
increased  9.8% or $1,373,000  over the fifty-two  weeks ended October 26, 1996,
despite 1996 consisting of revenues from five established  stores as compared to
1997  revenues,  which  consisted of only three  established  stores and the new
store in  Greenwich,  Connecticut.  Comparable  store sales for the  fifty-three
weeks ended November 1, 1997 increased by 26.7% or $2,786,000 as compared to the
fifty-two  weeks ended October 26, 1996. The increase in the Company's  revenues
is  attributable to increases in the volume of goods and services sold, and to a
lesser extent,  changes in product  lines.  The prices of its goods and services
have remained relatively  constant.  In 1996, the Company operated in Chapter 11
and at times during the year did not have adequate inventory levels. The Company
believes it currently has adequate inventory levels to support sales.

     The  increase in sales in fiscal  1997 is due  primarily  to the  Company's
marketing campaign where emphasis is placed on the quality of its manufacturers'
products, new technologies, service, and custom installation of home theater and
multi-room  audio/video  systems.  The Company  offers its consumers  attractive
financing  alternatives  on  purchases,  without  paying or  incurring  interest
expenses  for a six or twelve  month  period.  Customers  who qualify can obtain
longer  term  financing  with a Harvey  credit  card,  which the  Company  makes
available  to its  customers.  The Harvey  credit card is issued by an unrelated
finance  company.  The substantial use of such financing  alternatives  began in
June 1997. The total amount of additional  fees paid by the Company for the five
month  period  ended  November  1, 1997 is  approximately  $30,000.  This credit
alternative is a linchpin of the Company's new advertising campaign.  Additional
direct mail promotions were also successful during the period.

     Costs and  Expenses.  Total cost of sales for the  fifty-three  weeks ended
November 1, 1997  increased  5.8% or  $535,000  from the  fifty-two  weeks ended
October 26, 1996.  This was primarily the result of increased  comparable  store
sales offset by store closings.

     Gross profit margin for the  fifty-three  weeks ended  November 1, 1997 was
36.6%,  as compared to 34.2% for the fifty-two weeks ended October 26, 1996. The
gross  profit  margin  has  increased  as a result  of the  Company's  marketing
campaign where product quality is emphasized rather than price. The gross margin
also increased as a result of increased sales of custom  installation  which has
higher  gross  profit  margins.  Additionally,  an increase  was  realized  from
merchandising  changes made in late 1996 and throughout  1997,  where new higher
margin  products from new  manufacturers  were added and lower margin  products,
such as camcorders, cellular phones, and home office equipment, were eliminated.

     Selling, general and administrative expenses increased 3.6% or $233,000 for
the fifty-three  weeks ended November 1, 1997 as compared to the fifty-two weeks
ended October 26, 1996.  Comparable  store selling,  general and  administrative
expenses increased 12.2% or $631,000 for the fifty-three weeks ended November 1,
1997 as compared to the fifty-two  weeks ended October 26, 1996. The fifty-three
weeks ended November 1, 1997 includes net advertising  expenses of $401,000,  as
compared to $221,000 for the fifty-tw weeks ended October 26, 1996.

     Additionally,  the  fifty-three  weeks ended  November 1, 1997  includes an
aggregate amount for management fees and amortization of reorganization value in
excess of amounts  allocable  to  identifiable  assets of  $96,000.  The Company
incurred no expense for these items during the fifty-two weeks ended October 26,
1996.  Payroll and payroll related expenses  increased 15.2% or $418,000 for the
fifty-three  weeks ended  November 1, 1997 as  compared to the  fifty-two  weeks
ended October 26, 1996. This was primarily the result of additional  commissions
and incentives on increased sales and gross margins and the hiring of additional
sales,  warehouse and custom  installation  personnel.  The Company also hired a
full-time Vice President of Operations in June 1996.

     Interest  expense  decreased  35.8% or $181,000 for the  fifty-three  weeks
ended  November 1, 1997,  as compared to the  fifty-two  weeks ended October 26,
1996.   Interest   expense   decreased   primarily   from   the   reduction   of
debtor-in-possession  financing, including the loan servicing fees due to HAC in
the current  period (which was converted to equity).  The decrease was offset by
interest on a $350,000 loan made by E. H. Arnold,  a Preferred  Stockholder  and
member of HAC, during February and March 1997.

     Thirty-Nine  Weeks  ended  October 26,  1996  (Predecessor)  as Compared to
Thirty-Nine Weeks Ended October 28, 1995 (Predecessor)

     Net Income (Loss).  Net income for the thirty-nine  weeks ended October 26,
1996 was  $4,913,000 as compared to a net loss of $2,736,000  for the comparable
period in 1995.  Net income for the  thirty-nine  weeks ended  October 26, 1996,
includes an  extraordinary  gain on  forgiveness  of debt of $5,339,000  and the
effect of certain fresh start  adjustments  increasing net income by $1,858,000,
relating to the Company's successful reorganization. Net reorganization expenses
relating to the  Company's  Chapter 11 process for the  thirty-nine  weeks ended
October 26, 1996 were $247,000 as compared to $520,000 for the comparable period
in 1995.

     Revenues.  Net sales for the  thirty-nine  weeks  ended  October  26,  1996
decreased  16.6% or  $1,844,000,  as compared  to the same period in 1995.  This
decrease primarily related to four store closings relating to the reorganization
process and the  reduction of lower margin  corporate  sales.  Comparable  store
sales for the  thirty-nine  weeks ended  October 26, 1996  remained  the same as
compared to the prior  period,  despite the  difficulty  in  obtaining  adequate
levels of inventory,  the negative effects of the Chapter 11 reorganization  and
the difficult market conditions  experienced throughout the consumer electronics
industry.

     Cost and Expenses.  Cost of sales for the  thirty-nine  weeks ended October
26,  1996  decreased  16.7% or  $1,218,000  from the same  period in 1995.  This
decrease was primarily due to the store closings and reduced  corporate sales as
mentioned above.  Gross margins for the thirty-nine weeks ended October 26, 1996
and October 28, 1995 remained consistent at 34.2%.

     Selling,  general and  administrative  expenses for the  thirty-nine  weeks
ended October 26, 1996 decreased 14.6% or $845,000 as compared to the comparable
period  in 1995.  This  decrease  was due to store  closings  and the  Company's
ongoing cost reduction program,  offset by an additional $358,000 of advertising
expense incurred to reposition the Company during its reorganization  process in
1996.

     Interest expense for the thirty-nine weeks ended October 26, 1996 increased
15.9% or $49,000  from the  comparable  period in 1995.  This is  primarily  the
result of a full year of  debtor-in-possession  financing from HAC. In the prior
year, as a result of the  reorganization  process,  interest on all  liabilities
subject to compromise also ceased accruing on August 3, 1995.


     Liquidity and Capital Resources

     On November 13, 1996,  the Court  confirmed the  Reorganization  Plan.  The
effective date of the  Reorganization  Plan was December 26, 1996.  Prior to the
Reorganization  Date,  all of the  Company's  old shares of common and preferred
stock were  canceled.  The Company  simultaneously  amended its  Certificate  of
Incorporation  and is authorized to issue 10,010,000 shares consisting of 10,000
shares of 8 1/2%  Cumulative  Convertible  Preferred  Stock  with a par value of
$1,000 per share and 10,000,000  shares of Common Stock with a par value of $.01
per share.

     The Reorganization Plan provided for the following:

     Redistribution of Common Stock:

     Prior to the Reorganization  Date, the new shares of common stock in Harvey
Electronics, Inc. were issued as follows:

     2,000,000 shares were issued to Harvey Acquisition Company,  L.L.C. ("HAC")
in satisfaction of the $2,822,500 of subordinated  secured financing provided to
the Company during its reorganization process.

     186,306  shares  were  issued  to the  Company's  unsecured  creditors;  in
satisfaction of prepetition liabilities compromised (see below).

     19,962 shares were issued to the Company's former shareholders.

     InterEquity  Capital Partners,  L.P.  ("InterEquity"),  a prereorganization
subordinated  secured  debtholder,  received  51,565  shares of Common  Stock as
payment in full of an allowed finders fee.

     Issuance of Preferred Stock

     Prior to the  Reorganization  Date,  875 shares of the Company's  Preferred
Stock were issued to the Company's  prereorganization  subordinated secured debt
holders in exchange for $875,000 of such debt. The reorganization carrying value
of the Preferred Stock has been estimated to be $318,000 based on a sale of such
security,  independent of the Company,  for 36% of stated value.  The difference
between the carrying amount of the prereorganization debt and the reorganization
carrying value has been included with the  extraordinary  gain on forgiveness of
debt in the accompanying statement of operations for the thirty-nine weeks ended
October 26, 1996.

     Convenience Claims/Miscellaneous

     Convenience  claims  of  $1,000  or less  were  paid in cash  approximately
$20,000.  The Reorganization  Plan also provided for cash distribution ($452) of
$1.00 to any  former  shareholders  holding  100 or fewer  shares of old  common
stock.

     Agreement and Plan of Merger

     Pursuant to the  Reorganization  Plan,  the  Company's  Board of  Directors
approved the  Agreement  and Plan of Merger  effective  December 26, 1996 by and
between the Company and its 100% wholly owned  subsidiary,  Harvey  Sound,  Inc.
("Sound"), pursuant to which Sound was merged with and into the Company.

     (e) Change in Fiscal Year

     The  Company's  Board of Directors  approved an amendment to its By-Laws to
reflect the change in the  Company's  fiscal year from the  Saturday  closest to
January 31 to the Saturday closest to October 31.

     (f) Stock Option Plan

     The  Company's  Board of Directors  approved the Harvey  Electronics,  Inc.
Stock Option Plan ("Stock Option Plan").  The Stock Option Plan provides for the
granting of options to purchase up to  1,000,000  shares of Common  Stock of the
Company.

     (g) Prepetition Liabilities Subject to Compromise

     Under Chapter 11, certain claims against the Company in existence  prior to
the filing of the  petitions  for relief  under the Code were  stayed  while the
Company continued its operations as a debtor-in-possession.

     As a result of the  operational  restructuring,  the Company  recorded
reorganization  expenses  for the  thirty-nine  weeks ended  October 26, 1996 of
$497,206. Such charges consisted of costs associated with professional fees, and
the  write-off of  property,  equipment,  other assets and certain  receivables.
Additionally,  the Company  recorded  income from the sale of a lease during the
thirty-nine weeks ended October 26, 1996 in the amount of $250,000.

     Liabilities subject to compromise  immediately preceding the Reorganization
Plan  ($4,782,000),  were  satisfied  with the issuance of common stock as noted
above and the related  forgiveness of debt has been recorded as an extraordinary
gain the  accompanying  statement of operations for the thirty-nine  weeks ended
October 26, 1996.

     The balance sheet as of October 26, 1996 was prepared  based on Fresh Start
Reporting which was adopted on the  Confirmation  Date and applied as of October
26, 1996, the end of the accounting period closest to the Confirmation Date. The
Company has adopted  Fresh  Start  Reporting  in  accordance  with the  American
Institute of Certified Public Accountants Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization  under the Bankruptcy Code." Fresh Start
Reporting has resulted in changes to the balance sheet,  including  valuation of
assets and liabilities at fair market value and valuation of equity based on the
reorganization  value of the ongoing  business,  and accordingly,  the financial
statements  for  periods  prior and  subsequent  to the  adoption of Fresh Start
accounting are not comparable.

     The  reorganization  value  of the  Company  was  determined  based  on the
consideration  received  from HAC to obtain  its  ownership  in the  Company.  A
carrying  value of $318,000 was assigned to the Preferred  Stock.  Subsequent to
the  Reorganization  Date,  the Company  issued an  additional  51,565 shares of
Common Stock to InterEquity, as authorized by the Court, for an approved finders
fee.  The excess of the  reorganization  value over the fair value of net assets
and liabilities  ($1,582,440 at November 1, 1997) is reported as "Reorganization
value in excess of amounts allocable to identifiable  assets". See Note 1 to the
financial statements for further information.

     The Company's  ratio of current assets to current  liabilities  was 1.41 at
November 1, 1997 as compared to 1.51 at October 26,  1996.  The  decrease in the
current  ratio at  November  1,  1997 is  primarily  due to the net cash used in
operating  activities  as a result  of the  Company's  net  loss  for the  year,
partially  offset by working  capital  provided by the Company's  line of credit
facility.

     Since its  reorganization,  the  Company  has  reduced its net cash used in
operating  activities to $550,000 for the  fifty-three  weeks ended  November 1,
1997 from  $851,000  for the  thirty-nine  weeks ended  October 26,  1996.  This
reduction of net cash used in operating  activities  was primarily the result of
increased  net  contributions  from the  Company's  retail  stores in 1997,  and
despite additional trade accounts payable provided in 1996.

     Investing  activities  resulted  in a net use of cash of  $663,000  for the
fifty-three  weeks  ended  November  1, 1997 as compared to a net use of cash of
$65,000 for the  thirty-nine  weeks ended October 26, 1996. The increase in cash
used for 1997 was  primarily  due to the  purchases  of property  and  equipment
relating to the opening of the new store in Greenwich, Connecticut.

     Financing  activities resulted in an increase in net cash of $1,220,000 for
the  fifty-three  weeks  ended  November  1, 1997 as  compared to an increase of
$891,000 for the  thirty-nine  weeks ended  October 26, 1996.  This increase was
primarily the result of additional  net  borrowings  from the revolving  line of
credit  facility  and a note from a  preferred  stockholder  and  member of HAC,
offset by increased payments of Chapter 11 obligations.

     On November 5, 1997, the Company  entered into a three-year  revolving line
of credit  facility with Paragon Capital L.L.C.  ("Paragon"),  pursuant to which
the  Company  may  borrow up to  $3,300,000  based  upon a lending  formula  (as
defined),  calculated on eligible inventory. Proceeds received from Paragon were
used to  satisfy  the  balance  under the  credit  facility  with the  Company's
previous lender,  Congress  Financial  Corporation  ("Congress") and for working
capital purposes.  The Paragon facility provides an improved advance rate on the
Company's  inventory,  which resulted in additional  financing of  approximately
$750,000  (after  expenses)  above the  amount  previously  available  under the
Congress  facility.  The interest rate on borrowings up to $2,500,000 is 1% over
the prime rate of Norwest Bank Minnesota,  National  Association but in no event
less than eight (8%) percent per annum. The rate charged on outstanding balances
over $2,500,000 is 1.75% above this prime rate. As of the closing,  a commitment
fee in the  amount  of  $49,500  was  paid by the  Company.  A  facility  fee of
three-quarters  of one percent (.75%) of the maximum credit line will be charged
on  each  anniversary  date.  Monthly   maintenance  charges  of  $2,750  and  a
termination fee also exist under the facility.

     The maximum amount of borrowing available to the Company under this line is
limited to formulas  prescribed in the loan  agreements.  The Company's  maximum
borrowing  availability is equal to 75% of acceptable inventory,  minus the then
unpaid  principal  balance  of the  loan,  minus  the  then  aggregate  of  such
availability  reserves as may have been  established by Paragon,  minus the then
outstanding stated amount of all letters of credit.

     Pursuant to the credit  facility,  the Company must maintain certain levels
of inventory,  trade accounts payable,  inventory purchases,  net income or loss
and  minimum  gross  profit   margins.   Additionally   the  Company's   capital
expenditures,  assuming no retail store  expansion,  may not exceed $125,000 for
fiscal 1998.

     Paragon  obtained a senior security  interest in  substantially  all of the
Company's  assets.  The revolving line of credit facility  provides Paragon with
rights of  acceleration  upon the breach of certain  financial  covenant  or the
occurrence of certain customary events of default  including,  among others, the
event of bankruptcy.  The Company is also  restricted  from paying  dividends on
Common  Stock,  retiring or  repurchasing  its Common  Stock,  and entering into
additional indebtedness (as defined).

     Paragon also received a warrant to purchase  125,000 shares of Common Stock
at an exercise  price of $5.50 per share  subject to  adjustment  under  certain
circumstances,  which is  currently  exercisable  and  expires on April 3, 2001.
Paragon's  warrant and the underlying  shares have not been registered under the
Securities Act.

     The amount  outstanding under the Paragon revolving line of credit facility
as of January 28, 1998 is approximately $1,954,000.

     The Company's management believes that the Company's overhead structure has
the capacity to support additional stores without  significant  increase in cost
and personnel,  and, consequently,  the revenues and profit from new stores will
have a positive impact on the Company's operations.  Based on such belief of the
Company's  management,  the Company intends to utilize the net proceeds from the
proposed  Offering to open four new retail stores.  The design and layout of the
new stores are expected to be similar to the  Company's  retail store located in
Greenwich,  Connecticut.  The  Company  plans to locate new  stores in  affluent
suburbs similar to Greenwich,  Connecticut.  The prospective areas include North
Shore of Long Island and Westchester County in New York,  Monmouth County in New
Jersey and southern Connecticut.

     The  Company  has  preliminarily  identified  these  general  locations  as
potential  sites for the new stores because the  demographics of these areas are
consistent  with what the Company  believes to be its target  customer  base and
because  these  areas  are  served by the  media in which  the  Company  already
advertises.  By  spreading  the  advertising  costs over more stores and greater
revenues,  the Company believes it will receive better value for its advertising
expenditures. The Company plans to open the four new stores during the following
twenty-four  months.  The timing may vary depending upon many factors  including
the  ability  of the  Company  to  locate  suitable  premises  or to enter  into
acceptable  leases for the opening of the new stores.  The Company's  management
estimates  that the  total  cost of  opening  a retail  store  is  $650,000,  or
$2,600,000 for the four planned  stores.  The estimated cost of opening each new
store  includes  the  cost  of  leasehold  improvements,  including  design  and
decoration,  machinery and equipment, furniture and fixtures, security deposits,
opening inventory (net of the portion to be borrowed from the Company's lender),
lease acquisition expenses, pre-opening expenses, and additional advertising and
promotion in connection with the opening. However, expansion entails significant
risks  including an increase in rent and expenses  related to the operation of a
particular store. There can be no assurance that new stores, if opened, will, in
fact,  generate  sufficient  revenue to cover the operating expenses incurred by
such stores,  or contribute  positively to the Company's  results of operations.
The Company believes  acceptable retail space is available in the areas where it
intends to expand.

     As an alternative  to leasing and  developing new stores,  the Company will
consider   acquiring   the   business   of   existing   electronics   retailers.
Notwithstanding,  the  Company is not  engaged in any  negotiations  and has not
signed any agreement regarding any such potential acquisition.

     Management believes that the net proceeds from the proposed Offering,  plus
cash flow from  operations and funds made available  under the credit  facility,
will be sufficient to meet the Company's  anticipated  working capital needs and
expansion plan through the twenty-four  month period  immediately  following the
consummation of this Offering.

     During the periods presented, the Company was not significantly impacted by
the effects of inflation or seasonality.





                                 


<PAGE>






     Item 7. Financial Statements

                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                          Index to Financial Statements



<TABLE>
<CAPTION>
                                                            
                                                                                                      Page
<S>                                                                                                   <C>   

Report of Independent Auditors......................................................................   F-2

Balance Sheet--November 1, 1997......................................................................  F-3

Statements of Operations--Fifty-Three Weeks Ended November 1, 1997 and
   Thirty-Nine Weeks Ended October 26, 1996.........................................................   F-4

Statements of Shareholders' Equity--Fifty-Three Weeks Ended
   November 1, 1997 and Thirty-Nine Weeks Ended October 26, 1996....................................   F-5

Statements of Cash Flows--Fifty-Three Weeks Ended November 1, 1997
   and Thirty-Nine Weeks Ended October 26, 1996.....................................................   F-6

Notes to Financial Statements.......................................................................   F-7
</TABLE>

                                       F-1


<PAGE>



                         Report of Independent Auditors

     Shareholders and Board of Directors

     Harvey Electronics, Inc.

     We have audited the accompanying balance sheet of Harvey Electronics,  Inc.
(formerly The Harvey Group Inc. and subsidiaries) as of November 1, 1997 and the
related statements of operations,  shareholders'  equity, and cash flows for the
fifty-three  weeks ended November 1, 1997 (Successor) and the thirty-nine  weeks
ended  October  26,  1996  (Predecessor).  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  generally  accepted  auditing
standards.  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. at
November  1,  1997,  and the  results of its  operations  and its cash flows for
fifty-three  weeks ended November 1, 1997 (Successor) and the thirty-nine  weeks
ended October 26, 1996  (Predecessor),  in conformity  with  generally  accepted
accounting principles.

     The accompanying  financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1, the
Company has incurred  recurring  losses and negative cash flows from operations.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern.  Management's plans in regard to these matters are described
in Notes 1 and 5. The financial  statements do not include any adjustments  that
might result from the outcome of this uncertainty.




                                                ERNST & YOUNG LLP
Melville, New York
January 9, 1998

                                       F-2


<PAGE>






                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)
                                  Balance Sheet
                                November 1, 1997
<TABLE>
<CAPTION>

                                                                                                      Pro Forma
                                                                                                      Unaudited
                                                                                    Actual          (See Note 6)
                                                                              --------------------------------------
<S>                                                                                   <C>                <C>  
Assets
Current assets:
   Cash and cash equivalents                                                    $    10,033        $    10,033
   Accounts receivable, less allowance of $20,000                                   272,436            272,436
   Certificate of deposit                                                           200,000            200,000
   Inventories                                                                    3,559,778          3,559,778
   Prepaid expenses and other current assets                                        109,656            109,656
                                                                              --------------------------------------
Total current assets                                                              4,151,903          4,151,903

Property and equipment:
   Leasehold improvements                                                           644,646            644,646
   Furniture, fixtures and equipment                                                738,872            738,872
                                                                              --------------------------------------
                                                                                  1,383,518          1,383,518
   Less accumulated depreciation and amortization                                   179,604            179,604
                                                                              --------------------------------------
                                                                                  1,203,914          1,203,914

Equipment under capital leases                                                       15,768             15,768
Reorganization value in excess of amounts allocable to identifiable assets,
   less accumulated amortization of $68,130                                       1,582,440          1,582,440
Other, less accumulated amortization of $51,832                                     360,100            360,100
                                                                              --------------------------------------
Total assets                                                                 $    7,314,125     $    7,314,125
                                                                              ======================================

Liabilities and shareholders' equity Current liabilities:
   Trade accounts payable                                                    $    1,716,755     $    1,716,755
   Accrued expenses and other current liabilities                                 1,139,918          1,139,918
   Obligations relating to Chapter 11 reorganization                                 17,500             17,500
   Income taxes                                                                      30,400             30,400
   Current portion of capital lease obligations                                      32,542             32,542
                                                                              --------------------------------------
Total current liabilities                                                         2,937,115          2,937,115

Long-term liabilities:
   Long-term debt                                                                 2,127,851          2,127,851
   Cumulative Preferred Stock dividends payable                                      70,479             70,479
   Other liabilities                                                                157,411            157,411
   Capital lease obligations                                                          8,583              8,583

8-1/2%  Cumulative  Convertible  Preferred  Stock,  par value  $1,000 per share;
authorized   10,000  shares;   issued  and  outstanding  875  shares  (aggregate
liquidation preference--$875,000)                                                   396,037                 -

Shareholders' Equity:
8-1/2%  Cumulative  Convertible  Preferred  Stock,  par value  $1,000 per share;
authorized   10,000  shares;   issued  and  outstanding  875  shares  (aggregate
liquidation preference--$875,000)                                                        -            396,037
   Common Stock, par value $.01 per share; authorized 10,000,000 shares;
 issued and outstanding 2,257,833 shares                                             22,578            22,578
   Additional paid-in capital                                                     3,067,799          3,067,799
   Accumulated deficit                                                           (1,473,728)        (1,473,728)
                                                                              --------------------------------------
Total shareholders' equity                                                        1,616,649          2,012,686
                                                                              --------------------------------------
Total liabilities and shareholders' equity                                   $    7,314,125     $    7,314,125
                                                                              ======================================
</TABLE>


     See notes to financial statements.

                                       F-3


<PAGE>


                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                            Statements of Operations

<TABLE>
<CAPTION>

                                                                 Successor                    Predecessor
                                                           -------------------------------------------------------------
                                                            Fifty-Three           Thirty-Nine              Thirty-Nine
                                                             Weeks End            Weeks Ended              Weeks Ended
                                                            November 1,           October 26,              October 28, 
                                                              1997                  1996                      1995
                                                           --------------------------------------------------------------
                                                                                                         (Unaudited)(1)
<S>                                                         <C>                 <C>                     <C>        

Net sales                                                $   15,398,290       $    9,263,152       $   11,107,258
Interest and other income                                        72,652               87,657              78,487
                                                           --------------------------------------------------------------
                                                             15,470,942           9,350,809           11,185,745
                                                           --------------------------------------------------------------

Cost of sales                                                 9,764,755            6,094,499           7,312,311
Selling, general and administrative expenses                  6,706,180            4,937,316           5,782,070
Interest expense                                                325,219              355,922             307,015
                                                           --------------------------------------------------------------
                                                             16,796,154           11,387,737          13,401,396
                                                           --------------------------------------------------------------
Loss before reorganization expenses, fresh start 
adjustments and extraordinary item                           (1,325,212)          (2,036,928)         (2,215,651)
Reorganization expenses                                           -                 (497,206)           (520,418)
Reorganization income--sale of lease                              -                  250,000                -
                                                           --------------------------------------------------------------
Loss before fresh start adjustments and
   extraordinary item                                        (1,325,212)          (2,284,134)         (2,736,069)
Fresh start adjustments                                           -                1,857,844                -
                                                           --------------------------------------------------------------
Loss before extraordinary item                               (1,325,212)            (426,290)         (2,736,069)
Extraordinary gain on forgiveness of debt                      -                   5,338,852                -
                                                           --------------------------------------------------------------
Net (loss) income                                            (1,325,212)          4,912,562           (2,736,069)
Preferred Stock dividend requirement                            (70,479)                -                   -
Accretion of Preferred Stock                                    (78,037)                -                   -
                                                           --------------------------------------------------------------
Net (loss) income attributable to Common Stock           $   (1,473,728)     $    4,912,562       $   (2,736,069)
                                                           ==============================================================

Net (loss) per common share                                    $(.65)
                                                           =====================

Weighted average number of common and common equivalent
 shares outstanding during the period                        2,257,833
                                                           =====================
</TABLE>



     (1) Presented for comparison purposes only.

     See notes to financial statements.


                                       F-4


<PAGE>


                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                       Statements of Shareholders' Equity


<TABLE>
<CAPTION>

                                                                                                                        Total
                                               Preferred Stock     Common Stock      Additional  Accumulated Treasury Shareholders'
                                               Shares     Amount   Shares    Amount    Capital    (Deficit)    Stock     Equity
                                               -----------------------------------------------------------------------------------
<S>                                            <C>        <C>      <C>           <C>     <C>         <C>        <C>

Balance at January 27, 1996 (Predecessor)                       3,498,968 $3,498,968 $5,899,010 $(13,174,955) $(865,601)$(4,642,578)
  Net income for the thirty-nine weeks ended
    October 26, 1996                                                -         -          -         4,912,562       -      4,912,562
  Elimination of accumulated deficit upon
    implementation of fresh start accounting                        -         -          -         8,262,393       -      8,262,393
  Cancellation of Common Stock and treasury shares             (3,498,968)(3,498,968)(5,899,010)      -         865,601  (8,532,377)
  Issuance of common stock at reorganization value              2,257,833     22,578  3,067,799       -            -      3,090,377
                                                    -------------------------------------------------------------------------------
Balance at October 26, 1996 (Successor)                         2,257,833     22,578  3,067,799       -            -      3,090,377
   Net (loss) for the year                                         -            -        -        (1,325,212)      -    (1,325,212)
   Cumulative dividends on Preferred Stock                         -            -        -           (70,479)      -       (70,479)
   Accretion of Preferred Stock                                    -            -        -           (78,037)      -       (78,037)
                                                    -------------------------------------------------------------------------------
 Balance at November 1, 1997 (Successor)                         2,257,833     22,578 $3,067,799  $(1,473,728)  $   -   $ 1,616,649
                                               ====================================================================================

Pro forma balance (unaudited)
     at November 1, 1997                        875 $396,037    2,257,833    $22,578 $3,067,799  $(1,473,728)  $   -   $ 2,012,686
                                                    ===============================================================================
</TABLE>


     See notes to financial statements.


                                       F-5


<PAGE>


                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                            Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                              Successor           Predecessor
                                                                        ------------------------------------------
                                                                         Fifty-Three Weeks       Thirty-Nine Weeks
                                                                         Ended November 1,       Ended October 26, 
                                                                                1997                1996
                                                                        ------------------------------------------
<S>                                                                             <C>                <C>    

Operating activities
Net (loss) income                                                        $   (1,325,212)            $14,912,562
Adjustments to reconcile net (loss) income to net
 cash used in operating activities
     Extraordinary gain                                                            -                 (5,338,852)
     Fresh start adjustments                                                       -                 (1,857,844)
     Reorganization expenses                                                       -                    149,580
     Depreciation and amortization                                              371,434                 293,278
     Credit for losses on accounts receivable                                    (5,000)                 (5,000)
     Provisions for sales tax and warranty reserves                                -                     39,000
     Write-off of other assets                                                   32,164                     -
     Straight-line impact of rent escalations                                    61,055                   1,235
     Miscellaneous                                                              (10,000)                (22,401)
     Changes in operating assets and liabilities:
       Accounts receivable                                                       38,360                  43,412
       Inventories                                                             (550,940)               (147,850)
       Prepaid expenses and other current assets                                143,795                 (11,718)
       Trade accounts payable                                                   390,937               1,121,362
       Accrued expenses, other current liabilities and income taxes             303,407                 (27,717)
                                                                        ------------------------------------------
Net cash used in operating activities                                          (550,000)               (850,953)
                                                                        ------------------------------------------

Investing activities
Proceeds from note receivable from former officer/shareholder                      -                    125,000
Net book value of deletions                                                      37,254                    -
Purchases of property and equipment                                            (629,618)                (64,707)
Increase in other assets                                                        (70,879)               (125,303)
                                                                        ------------------------------------------
Net cash used in investing activities                                          (663,243)                (65,010)
                                                                        ------------------------------------------

Financing activities
Proceeds from note payable                                                      350,000                      -
Public offering costs                                                          (126,665)                     -
Costs relating to refinancing                                                   (67,532)                     -
Debtor-in-possession financing                                                  605,000                 717,500
Obligations relating to Chapter 11 reorganization                              (456,913)                279,409
Net proceeds from revolving line of credit facility                             999,634                  23,547
Principal payments on long-term debt                                                -                   (90,010)
Principal payments on capital lease obligations                                 (83,627)                (39,896)
                                                                        ------------------------------------------
Net cash provided by financing activities                                     1,219,897                 890,550
                                                                        ------------------------------------------
Increase (decrease) in cash and cash equivalents                                  6,654                 (25,413)
Cash and cash equivalents at beginning of period                                  3,379                  28,792
                                                                        ------------------------------------------
Cash and cash equivalents at end of period                                   $   10,033             $     3,379
                                                                        ==========================================
</TABLE>


     See notes to financial statements.


                                       F-6


<PAGE>





                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                          Notes to Financial Statements

                                November 1, 1997




     1. Basis of Presentation, Plan of Reorganization and Fresh Start Reporting

     Basis of Presentation

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue as a going  concern.  The  Company,  which  emerged from
reorganization under Chapter 11 of the Bankruptcy Code after confirmation of its
Reorganization  Plan on November 13, 1996,  has  incurred  recurring  losses and
negative cash flows from  operations  for each of the periods  presented.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters principally include
raising  additional equity through a proposed public offering (see Note 5) and a
refinancing  of the  Company's  existing  credit  facility  (see Note 4). If the
Company is successful in the proposed Offering,  it will seek to utilize the net
proceeds  to open or acquire  additional  retail  facilities.  If the Company is
unable to accomplish these objectives or otherwise generate sufficient levels of
cash flows from  operations,  the Company may not be able to continue as a going
concern. The financial statements do not include any adjustments that may result
from the possible inability of the Company to continue as a going concern.

     Plan of Reorganization

     On August 3, 1995,  the Company  (then known as The Harvey  Group Inc.  and
Subsidiaries  or  "Predecessor")  filed petitions for relief under Chapter 11 of
the United States  Bankruptcy Code with the United States  Bankruptcy  Court for
the Southern  District of New York (the "Court").  This filing was the result of
certain negative  factors  including but not limited to: (i) the negative effect
of a $2,138,000  judgment  entered against the Company;  (ii) liabilities of The
Harvey Group Inc.,  including the obligations of its discontinued food brokerage
division,  the payment of which significantly  reduced cash; (iii) the recession
in the early 1990's  coupled  with the soft market in the  consumer  electronics
industry,  all of which resulted in losses and a shortage of cash flow; and (iv)
the delisting of the Predecessor's common stock from the American Stock Exchange
in June 1995,  which  delisting  made a proposed $4.2 million  equity  placement
untenable.

     On November 13, 1996 (the  "Confirmation  Date"),  the Court  confirmed the
Restated  Modified  Amended  Joint  and   Substantially   Consolidated  Plan  of
Reorganization  of The  Harvey  Group  Inc.  (the  "Reorganization  Plan").  The
Effective date of the Reorganization Plan


                                       F-7


<PAGE>





                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)






     1. Basis of Presentation,  Plan of Reorganization and Fresh Start Reporting
(continued)

was December 26, 1996 (the "Reorganization Date"), at which time The Harvey
Group Inc.  emerged from its Chapter 11  reorganization  and changed its name to
Harvey Electronics, Inc. The Company has given effect to the Reorganization Plan
as of  October  26,  1996,  the  end of the  accounting  period  nearest  to the
Confirmation Date.

     Prior to the Reorganization Date, all of the Company's old shares of common
and  preferred  stock were  canceled.  The  Company  simultaneously  amended its
Certificate  of  Incorporation  and is  authorized  to issue  10,010,000  shares
consisting of 10,000 shares of 8.5% Cumulative  Convertible Preferred Stock (see
Note 6) with a par  value of  $1,000  per  share  (the  "Preferred  Stock")  and
10,000,000  shares of  Common  Stock  with a par  value of $.01 per  share  (the
"Common Stock").

     The Reorganization Plan provided for the following:

     a. Redistribution of Common Stock

     Prior to the Reorganization  Date, the new shares of common stock in Harvey
Electronics, Inc. were issued as follows:

     2,000,000 shares were issued to Harvey Acquisition Company,  L.L.C. ("HAC")
in satisfaction of the $2,822,500 of subordinated  secured financing provided to
the Company during its reorganization process.

     186,306  shares  were  issued  to the  Company's  unsecured  creditors;  in
satisfaction of prepetition liabilities compromised.

     19,962 shares were issued to the Company's former shareholders.

     InterEquity  Capital Partners,  L.P.  ("InterEquity"),  a prereorganization
subordinated  secured  debtholder,  received  51,565  shares of Common  Stock as
payment in full of an allowed finders fee.

     As a result of the above,  2,257,833  shares of Common Stock were issued on
the Effective date.

                                       F-8


<PAGE>


                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)



     1. Basis of Presentation,  Plan of Reorganization and Fresh Start Reporting
(continued)

     b. Issuance of Preferred Stock (see Note 6)

     Prior to the  Reorganization  Date,  875 shares of the Company's  Preferred
Stock were issued to the Company's  prereorganization  subordinated secured debt
holders in exchange for $875,000 of such debt. The reorganization carrying value
of the Preferred Stock has been estimated to be $318,000 based on a sale of such
security,  independent of the Company,  for 36% of stated value.  The difference
between the carrying amount of the prereorganization debt and the reorganization
carrying value has been included with the  extraordinary  gain on forgiveness of
debt in the accompanying statement of operations for the thirty-nine weeks ended
October 26, 1996.

     c. Convenience Claims/Miscellaneous

     Convenience  claims  of  $1,000  or less  were  paid in cash  approximating
$20,000.  The Reorganization Plan also provided for cash distributions ($452) of
$1.00 to any  former  shareholders  holding  100 or fewer  shares of old  common
stock.

     d. Agreement and Plan of Merger

     Pursuant to the  Reorganization  Plan,  the  Company's  Board of  Directors
approved the  Agreement  and Plan of Merger  effective  December 26, 1996 by and
between the Company and its 100%  wholly-owned  subsidiary,  Harvey Sound,  Inc.
("Sound"), pursuant to which Sound was merged with and into the Company.

     e. Change in Fiscal Year

     The  Company's  Board of Directors  approved an amendment to its By-Laws to
reflect the change in the  Company's  fiscal year from the  Saturday  closest to
January 31 to the Saturday closest to October 31.


                                       F-9


<PAGE>



                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)



     1. Basis of Presentation,  Plan of Reorganization and Fresh Start Reporting
(continued)

     f. Stock Option Plan

     The  Company's  Board of Directors  approved the Harvey  Electronics,  Inc.
Stock Option Plan ("Stock Option Plan").  The Stock Option Plan provides for the
granting of options to purchase up to  1,000,000  shares of Common  Stock of the
Company (see Note 6).

     g. Prepetition Liabilities Subject to Compromise

     Under Chapter 11, certain claims against the Company in existence  prior to
the filing of the  petitions  for relief  under the Code were  stayed  while the
Company continued its operations as a debtor-in-possession.

     As  a  result  of  the  operational  restructuring,  the  Company  recorded
reorganization  expenses for the  thirty-nine  weeks ended October 26, 1996 of $
$497,206. Such charges consisted of costs associated with professional fees, and
the  write-off of  property,  equipment,  other assets and certain  receivables.
Additionally,  the Company  recorded  income from the sale of a lease during the
thirty-nine weeks ended October 26, 1996 in the amount of $250,000.

     Liabilities subject to compromise  immediately preceding the Reorganization
Plan  ($4,782,000),  were  satisfied  with the issuance of common stock as noted
above and the related  forgiveness of debt has been recorded as an extraordinary
gain in the accompanying statement of operations for the thirty-nine weeks ended
October 26, 1996.

     Fresh Start Reporting

     Fresh Start Reporting was adopted on the  Confirmation  Date and applied as
of  October  26,  1996,  the  end  of  the  accounting  period  closest  to  the
Confirmation Date.  Results of operations and balance sheet differences  between
such dates were insignificant.  The Company has adopted Fresh Start Reporting in
accordance with the American Institute of Certified Public Accountants Statement
of Position 90-7,  "Financial  Reporting by Entities in Reorganization under the
Bankruptcy Code." The Company adopted  fresh-star  reporting because the holders
of existing voting shares immediately before filing and confirmation of the plan
received

                                      F-10


<PAGE>



                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)



     1. Basis of Presentation,  Plan of Reorganization and Fresh Start Reporting
(continued)

less  than  50%  of the  voting  shares  of the  emerging  entity  and  its
reorganization  value is less  than its  postpetition  liabilities  and  allowed
claims.

     Fresh  Start  Reporting  has  resulted  in  changes to the  balance  sheet,
including valuation of assets and liabilities at fair market value and valuation
of  equity  based on the  reorganization  value  of the  ongoing  business,  and
accordingly,  the  financial  statements  for  periods  prior  (referred  to  as
"Predecessor")  and subsequent  (referred to as "Successor" or "Company") to the
adoption of Fresh Start accounting are not comparable.

     The  reorganization  value  of the  Company  was  determined  based  on the
consideration  received  from HAC to obtain  its  ownership  in the  Company.  A
carrying  value of $318,000  was assigned to the  Preferred  Stock (see Note 6).
Subsequent to the  Reorganization  Date, the Company issued an additional 51,565
shares of Common  Stock to  InterEquity,  as  authorized  by the  Court,  for an
approved finders fee. The excess of the reorganization value over the fair value
of net assets and  liabilities  ($1,582,440  at November 1, 1997) is reported as
"Reorganization value in excess of amounts allocable to identifiable assets" and
is being  amortized  over a  twenty-five  year period.  Amortization  expense of
$68,130 was recorded for fiscal year 1997.

     The  revaluation of the Company's  assets and  liabilities  resulted in the
following Fresh Start  adjustments  for the thirty-nine  weeks ended October 26,
1996:
<TABLE>
<CAPTION>
<S>                                                                                         <C>   

Increase in property and equipment (based on appraisal)                                   $292,236
Decrease in other assets                                                                  (32,462)
Increase in other liabilities                                                             (52,500)
Reorganization value in excess of amounts allocable to
   identifiable assets                                                                 1,650,570
                                                                                     ---------------------
                                                                                       $1,857,844
                                                                                     =====================
</TABLE>



                                      F-11


<PAGE>





                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)




     1. Basis of Presentation,  Plan of Reorganization and Fresh Start Reporting
(continued)

     The accumulated  deficit of $8,262,393 at October 26, 1996,  which included
the effects of the Fresh Start adjustments,  was reclassified to additional paid
in capital.

     In March 1995, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 121,  "Accounting for
the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed
Of," which requires  impairment  losses to be recorded on long-lived assets used
in operations  when  indicators of impairment  are present and the  undiscounted
cash flows  estimated  to be generated by those assets are less than the assets'
carrying  amount.  SFAS No. 121 also  addresses the  accounting  for  long-lived
assets that are expected to be disposed of. Operating  losses  subsequent to the
Company's  emergence from Chapter 11 indicate that the  reorganization  value in
excess of amounts allocable to identifiable  assets might be impaired.  However,
the Company's  estimate of  undiscounted  cash flows indicate that such carrying
amounts are expected to be recovered.

     The statements of operations and cash flows  presented for the  thirty-nine
weeks ended October 26, 1996  represent the  Debtor-in-Possession  operations of
the Company, prior to the Reorganization Date.

     2. Summary of Significant Accounting Policies

     Description of Business

     The Company is a specialty  retailer of high quality  audio/video  consumer
electronics and home theater products in the Metropolitan New York area. Revenue
from retail sales is  recognized at the time goods are delivered to the customer
or, for certain  installation  services,  when such  services are  performed and
accepted by the customer.

     Accounting Estimates

     The  preparation of the financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect the financial  statements and accompanying notes. Actual
results could differ from those estimates.

                                      F-12


<PAGE>


                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)


     2. Summary of Significant Accounting Policies (continued)

     Unaudited Financial Statements

     The  unaudited  statement of  operations  for the  thirty-nine  weeks ended
October 28, 1995 is presented for  comparison  purposes only, and in the opinion
of management, include all adjustments (consisting of normal recurring accruals)
necessary for the fair presentation of such financial statements.

     Stock Options

     In October 1995, the FASB issued SFAS No. 123,  "Accounting for Stock-Based
Compensation."  SFAS No. 123 defines a fair value method of  accounting  for the
issuance of stock  options and other  equity  instruments.  Under the fair value
method,  compensation cost is measured at the grant date based on the fair value
of the award and is  recognized  over the service  period,  which is usually the
vesting period. Pursuant to SFAS No. 123, companies are encouraged,  but are not
required,  to adopt the fair value method of accounting for employee stock-based
transactions.  Companies  are also  permitted  to  continue  to account for such
transactions  under  Accounting  Principles Board Opinion No. 25, as the Company
has  elected to do, but are  required to  disclose  in the  financial  statement
footnotes,  pro-forma  net income and per share  amounts as if the  Company  had
applied the new method of  accounting  for all grants made since 1996.  SFAS No.
123  also  requires   increased   disclosures   for   stock-based   compensation
arrangements.  The Company has adopted the disclosure  requirements  of SFAS No.
123.

     Inventories

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

     Investments

     The Company has  classified  its  investment in a certificate of deposit as
available-for-sale.  The  certificate  of  deposit  is  stated  at  cost,  which
approximates  fair  value.  In January  1998,  the  certificate  of deposit  was
redeemed.  There were no unrealized  gains or losses on this  investment for the
periods presented.


                                      F-13


<PAGE>


                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)


     2. Summary of Significant Accounting Policies (continued)

     Depreciation and Amortization

     Depreciation of property and equipment,  including equipment acquired under
capital leases, is provided for by the  straight-line  method over the estimated
useful  lives  of the  related  equipment,  ranging  from  three  to ten  years.
Leasehold  improvements  are amortized  over the lease term or estimated  useful
life of the improvements, whichever is shorter.

     Loss Per Share

     The loss per common share for the fifty-three  weeks ended November 1, 1997
was computed based on the weighted average number of common shares  outstanding.
Common  equivalent  shares were not considered for the  fifty-three  weeks ended
November  1, 1997 since their  inclusion  would have been  antidilutive.  Income
(loss) per share is not presented for the  pre-bankruptcy  periods  because such
amounts are not comparable to the post-bankruptcy period.

     In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
is effective for both interim and annual financial statements for periods ending
after  December 15, 1997.  At such time,  the Company will be required to change
the method currently used to compute earnings per share and restate all periods.
Under the new  requirements  for  calculating  basic  earnings  per  share,  the
dilutive effect of stock options,  warrants,  and convertible securities will be
excluded. The impact of adopting SFAS No. 128 is not expected to be material.

     Statement of Cash Flows

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

     Total  interest paid for the  fifty-three  weeks ended November 1, 1997 and
for the thirty-nine weeks ended October 26, 1996 was approximately  $282,000 and
$269,000, respectively.


                                      F-14


<PAGE>





                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)


     2. Summary of Significant Accounting Policies (continued)

     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

     Advertising expense, net of cooperative advertising allowances,  is charged
to operations  when the  advertising  takes place.  Advertising  expense for the
fifty-three  weeks ended  November 1, 1997 and for the  thirty-nine  weeks ended
October 26, 1996 was approximately $401,000 and $358,000, respectively.  Prepaid
advertising for print advertisements not run at November 1, 1997 and October 26,
1996 was approximately $15,000 and $183,000, respectively.

     3. Debtor-in-Possession Financing

     On October 24,  1995,  in  connection  with the  Reorganization  Plan,  the
Company  entered into a Security Loan  Agreement  ("Loan  Agreement")  with HAC,
enabling  the  Company  to  borrow  up  to  $1,500,000  in  debtor-in-possession
financing.  The  Loan  Agreement  bore  interest  at 2% over the  prime  rate at
Citibank,  N.A.  and was  subordinate  only  to the  Company's  primary  lender,
Congress Financial  Corporation  ("Congress"),  as evidenced by an intercreditor
agreement between HAC and Congress (see Note 4).

     The proceeds  ($1,500,000)  received in installments  from HAC coupled with
credit support from the Company's  vendors and bank primarily were used to build
inventory  levels.  On May 6, 1996, the Company  received an additional  $50,000
from HAC to be used for general operating purposes.  In September 1996, the Loan
Agreement  was amended,  enabling the Company to borrow up to  $3,000,000.  As a
result of the amendment,  additional  proceeds of $1,272,500  were received from
HAC ($605,000 of such proceeds  were received  during fiscal 1997),  for a total
aggregating  $2,822,500.  The proceeds  were used for capital  expenditures,  to
build a new retail store in Greenwich,  Connecticut,  advertising,  professional
fees and for

                                      F-15


<PAGE>


                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)



     3. Debtor-in-Possession Financing

working capital purposes. This debtor-in-possession financing was converted
into  2,000,000  shares  of the  Common  Stock  of the  reorganized  Company  in
accordance with the Plan of Reorganization (see Note 1).

     Under the Loan Agreement,  the Company paid $5,000 per month representing a
loan servicing fee to HAC. Such amounts  aggregated  $45,000 for the thirty-nine
weeks ended October 26, 1996.

     Subsequent to the Reorganization Date, an individual who is a member of HAC
and a holder of Preferred Stock, provided an additional $350,000 of financing to
the Company, to be used for working capital purposes.  This amount is payable in
full on  December  31, 1998 with  interest at 12% per annum,  and may be prepaid
without  penalty.  Interest expense and amount payable to this member of HAC was
$28,000 as of and for the year ended November 1, 1997.

     4. Revolving Lines of Credit Facilities

     On November 5, 1997, the Company  entered into a three-year  revolving line
of credit facility with Paragon Capital L.L.C.  ("Paragon")  whereby the Company
may borrow up to $3,300,000 based upon a lending formula (as defined) calculated
on eligible  inventory.  Proceeds  from Paragon were used to pay down and cancel
the existing  credit  facility  with  Congress,  reduce  trade  payables and pay
related  costs of the  refinancing.  The Paragon  facility  provides an improved
advance  rate on the  Company's  inventory,  which  resulted in  additional  net
financing of approximately  $750,000 (after expenses)  compared to the Company's
previous  facility  with  Congress,  as discussed  below.  The interest  rate on
borrowings  up to  $2,500,000  is 1% over the prime  rate.  The rate  charged on
outstanding balances over $2,500,000 is 1.75% above the prime rate. A commitment
fee of $49,500  (to be  amortized  over three  years) was paid by the Company at
closing  and a  facility  fee of  three-quarters  of one  percent  (.75%) of the
maximum credit line will be charged each year. Monthly maintenance charges and a
termination fee also exist under the line of credit.

     Paragon also received a warrant to purchase 125,000 shares of common stock,
subject to  adjustment,  which is currently  exercisable at a price of $5.50 per
share and expires  April 3, 2001.  The  Company  will record a charge over three
years, beginning with the first quarter of fiscal 1998, based upon the estimated
fair value of such warrant.

                                      F-16


<PAGE>





                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)



     4. Revolving Lines of Credit Facilities (continued)

     Paragon has a senior security interest in all of the Company's assets.  The
line of credit facility  provides  Paragon with rights of acceleration  upon the
occurrence of certain customary events of default  including,  among others, the
event of bankruptcy.  The Company is restricted from paying  dividends on common
stock,  retiring or  repurchasing  its common stock and entering into additional
indebtedness (as defined). Additionally, certain financial covenants exist.

     In fiscal 1995,  the Company  entered into a three-year  revolving  line of
credit  facility  with  Congress,   whereby  the  Company  could  borrow  up  to
$3,000,000,  based upon a lending  formula (as defined)  calculated  on eligible
inventory.  Amendments to the Congress  revolving  line of credit  facility were
completed  on  January  7, 1997 and  March 31,  1997,  primarily  extending  the
facility through January 6, 2000,  instituting a net worth covenant (as defined)
and increasing available borrowings by approximately  $250,000,  by amending the
lending  formula  (as  defined).  The  interest  rate per  annum on this  credit
facility  was the prime rate (8.5% at October 26,  1996) plus 2%. An unused line
fee of one-quarter of one percent per annum and a prescribed  early  termination
fee also existed  under the line of credit  facility.  At closing,  $200,000 was
required  to be placed  in escrow in a  certificate  of  deposit  as  additional
collateral  for  Congress.  The Company  had  $1,777,851  outstanding  under the
Congress  credit facility at November 1, 1997. As mentioned  above,  this credit
facility  was  canceled and replaced by a new  revolving  credit  facility  with
Paragon.  As a result,  the Company paid an early  termination fee of $30,000 to
Congress.

     5. Proposed Public Offering

     On  September  15,  1997,  the  Company  signed a letter of intent  with an
underwriter  to sell common  stock and  warrants to purchase  common  stock in a
public  offering (the  "Offering") . The  underwriter  proposes to co-manage and
underwrite  an  offering of 850,000  shares of the  Company's  common  stock and
1,300,000 of warrants ("Warrants") to acquire additional shares of Common Stock.
The net proceeds from the Offering  will be used for retail store  expansion and
working capital purposes.


                                      F-17


<PAGE>



                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)


     5. Proposed Public Offering (continued)

     Each Warrant shall be exercisable  for one share of common stock at 110% of
the public offering price, for a period of three years commencing two years from
the effective  date of the Offering.  The Warrants  also are  redeemable,  (at a
prescribed price) at the Company's option, two years after the effective date of
the  Offering if the closing  bid price of the common  stock for 20  consecutive
trading days exceeds 150% of the public offering price per share.

     At the  underwriter's  election,  it may  underwrite an additional  127,500
shares and or 195,000 Warrants if market conditions  permit. The first 27,500 of
such shares would be sold by the Company and any additional  shares will be sold
by HAC with the proceeds to be received by HAC.

     The Offering is subject to certain conditions,  as defined in the letter of
intent.  There  can be no  assurance  that  this  proposed  transaction  will be
completed.

     Subsequent  to November 1, 1997,  HAC  transferred  85,000 shares of Common
Stock to certain employees and directors of the Company and an individual who is
a preferred  shareholder and a member of HAC. Such transfer is to be treated for
accounting purposes as if such shares were issued by the Company as compensation
to such persons.  The Company will record compensation expense equal to the fair
market value of the shares over the two-year  period during which the shares are
subject to forfeiture by the transferees.

     6. Stock Option Plan and Preferred Stock

     Stock Option Plan

     In  conjunction  with  the  Reorganization  Plan,  the  Company's  Board of
Directors approved the Harvey Electronics, Inc. Stock Option Plan ("Stock Option
Plan").  The Stock Option Plan is subject to  shareholder  approval and 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.  The Company's  previous stock option plan was canceled in connection
with the  Reorganization  Plan. On December 5, 1997, the Company's  Compensation
and Stock Option Committee of the Board of Directors approved a grant, as of

                                      F-18


<PAGE>





                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)



     6. Stock Option Plan and Preferred Stock (continued)

the effective date of the Offering,  of 70,000  incentive  stock options to
many  of  the  Company's  employees  to  purchase  the  Company's  Common  Stock
exercisable  as to  one-third  of such shares at an exercise  price of $5.00 per
share  commencing one year from the effective date;  one-third of such shares at
an exercise  price of $5.50 per share  commencing  two years from the  effective
date and the  remaining  one-third of such shares at $6.00 per share  commencing
three years from the effective date.

     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 Fresh Start  carrying  value of the  Preferred
Stock was estimated to be $318,000 at October 26, 1996.

     In the event of  liquidation  of the Company,  the holders of the Preferred
Stock shall  receive  preferential  rights and shall be entitled to receive face
value  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 annually),  payable on the last business day
in June and  December.  The  Company may and has elected to defer only the first
year's dividend at a preference  rate of $105 per share  annually.  This amount,
plus  interest  at 8.5%  per  annum,  will be  payable  in  three  equal  annual
installments from December 31, 1998 through 2000.

     The  Preferred  Stock may be  converted  into shares of Common  Stock until
December 31, 2000 at the option of the holder,  in whole or in part, as follows:
(i) the first 50% of the  Preferred  Stock can be  converted at $6.00 per share,
and (ii) the balance is convertible at $7.50 per share.  Beginning on January 1,
2001,  the Preferred  Stock is  convertible  at the average  closing  price,  as
defined, of the Company's Common Stock for the preceding 45 day period.


                                      F-19


<PAGE>


                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)


     6. Stock Option Plan and Preferred Stock (continued)

     The Preferred Stock also contained a redemption  feature whereby each share
would be redeemed on December 31, 2000. In December 1997, the redemption feature
was eliminated and the holders of the Preferred  Stock received  36,458 Warrants
with terms  equivalent  to the  Warrants in the  Offering  (see Note 5). The pro
forma  balance  sheet  (unaudited)  at  November 1, 1997 has been  presented  to
reflect the Preferred Stock in stockholder's equity as though the removal of the
redemption feature had taken place on such date.

     Accumulated  Preferred Stock  dividends  payable of $70,479 are outstanding
and were recorded as a long-term  liability at November 1, 1997. Such dividends,
along with the accretion on the redeemable  Preferred Stock,  were recorded as a
reduction of retained earnings at November 1, 1997.

     7. Income Taxes

     At  November  1,  1997,  the  Company  has  available  net  operating  loss
carryforwards of approximately  $9,400,000 which expire in various years through
fiscal   2012.   Of   this   amount,   approximately   $8,100,000   relates   to
pre-reorganization  net  operating  loss  carryforwards.  As  a  result  of  the
Company's  Reorganization Plan and significant  ownership change,  under Section
382 of the IRS Code, it is estimated that the  pre-reorganization  net operating
loss carryforward and other pre-reorganization tax attributes will be limited to
approximately $150,000 per year over the next fifteen years.

     At October 26,  1996 and  November 1, 1997,  the Company had  deferred  tax
assets of approximately $765,000 and $1,207,000, respectively, arising primarily
from the future availability of the above tax attributes. Such amounts have been
offset in full by a valuation allowance in each year.

     Future benefits  realized,  if any, from  pre-reorganization  net operating
loss carryforwards would first reduce  reorganization value in excess of amounts
allocable to identifiable assets until exhausted and thereafter be reported as a
direct addition to paid in capital.


                                      F-20


<PAGE>

                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)


     8. Pension and Profit Sharing Plan

     The Harvey Group Inc.  Savings and  Investment  Plan (the "Plan")  includes
profit sharing,  defined  contribution and 401(k) provisions and is available to
all eligible  employees of the Company.  There were no contributions to the Plan
for the fifty-three  weeks ended November 1, 1997 and for the thirty-nine  weeks
ended  October 26,  1996.  Effective  January 1, 1995,  the  Company's  Board of
Directors temporarily elected to eliminate the employer 401(k) match on employee
contributions. Subsequent to the Effective Date, the Plan's name was amended and
changed to Harvey Electronics, Inc. Savings and Investment Plan.

     9. Commitments and Contingencies

     Commitments

     The Company's  financial  statements  reflect the  accounting for equipment
leases as capital  leases by  recording  the asset and  liability  for the lease
obligation.  Additional  capital leases for the fifty-three weeks ended November
1, 1997 total $11,000.  Future minimum  rental  commitments,  by year and in the
aggregate,  under the capital  leases and  noncancelable  operating  leases with
initial or remaining  terms of one year or more  consisted  of the  following at
November      1,      1997: 

                                Operating          Capital      
                                   Leases          Leases
                              ------------------------------

Fiscal 1998                   $  956,000      $     35,000
Fiscal 1999                      992,000             4,000
Fiscal 2000                    1,018,000             4,000
Fiscal 2001                    1,027,000             2,000
Fiscal 2002                      989,000               -
Thereafter                     2,348,000               -
                              -----------------------------
Total minimum lease payments  $7,330,000            45,000
                              ============
Less amount representing interest                    4,000
                                                   --------
Present value of net minimum lease payments         41,000
Less current portion                                32,000
                                                   --------
                                               $     9,000
                                                   ========

     Minimum rental  commitments are offset by sublease income of  approximately
$93,000 per annum through fiscal 2001.

                                      F-21


<PAGE>


                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)






     9. Commitments and Contingencies (continued)

     Total rental expense for operating leases was approximately  $1,517,000 and
$1,234,000,  for the  fifty-three  weeks  ended  November  1,  1997  and for the
thirty-nine weeks ended October 26, 1996,  respectively.  Certain leases provide
for the payment of insurance,  maintenance charges and taxes and contain renewal
options.

     The Company is obligated  under annual or biannual  agreements with certain
of its  vendors  to  attain  certain  minimum  levels  of  inventory  purchases,
aggregating approximately $900,000 per year over the next two years.

     Contingencies

     The  Company is a defendant  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
or operations.

     The Company had available standby letters of credit outstanding at November
1, 1997, aggregating $100,000.

     10. Other Information

     Accrued   Expenses  and  Other   Current   Liabilities

                                                          November  1,  1997
                                                         ----------------------

Payroll and payroll related items                             $  144,074
Accrued professional fees                                        403,213
Customer layaways                                                298,704
Accrued interest                                                  99,855
Sales taxes                                                       77,297
Other                                                            116,775
                                                         ----------------------
                                                              $1,139,918
                                                         ======================

     Other Long-Term Liabilities

                                                           November 1, 1997
                                                         ----------------------

Straight-line impact of lease escalations                       $136,411
Other                                                             21,000
                                                         ----------------------
                                                                $157,411
                                                         ======================


                                      F-22


<PAGE>

                            Harvey Electronics, Inc.
                (Formerly The Harvey Group Inc. and Subsidiaries)

                    Notes to Financial Statements (continued)


     10. Other Information (continued)

     Other

     The  financial  statement  caption  "Interest  and  other  income"  for the
thirty-nine weeks ended October 26, 1996, includes $45,605 of interest and other
income relating to proceeds of a division of the Predecessor in a previous year.

     Interest  expense  relating to the HAC  debtor-in-possession  financing was
approximately  $35,000 and $149,000 for the fifty-three  weeks ended November 1,
1997  and for the  thirty-nine  weeks  ended  October  26,  1996,  respectively.
Interest payable to HAC at November 1, 1997 was approximately $66,000.

     Management  fees of  $30,000  relating  to a  Company  affiliated  with the
Company's  Chairman,  were expensed for the fifty-three  weeks ended November 1,
1997.  Approximately  $24,000  of loan  servicing  fees and other  miscellaneous
amounts were payable to this Company at November 1, 1997.



                                      F-23


<PAGE>




     Item 8.

     Changes In and  Disagreements  With Accountants on Accounting and Financial
Disclosure.



     None

                                        1




<PAGE>




                                    Part III


     Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons;
Compliance  with Section  16(a) of the Exchange Act. The directors and executive
officers of the Company are as follows:
<TABLE>
<CAPTION>

     Name                            Age(1)                             Position
------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>    

Michael Recca.                          47         Chairman and Director
William F. Kenny, III                   66         Director
Stewart L. Cohen                        43         Director
Franklin C. Karp                        44         President and Director
Joseph J. Calabrese                     38         Executive Vice President, 
                                                   Chief Financial Officer, Treasurer, 
                                                   Secretary and Director
Michael A. Beck                         38         Vice President of Operations
Roland W. Hiemer                        36         Director of Inventory Control
</TABLE>

----------------------
(1) As of January 1, 1997.

     Michael  E. Recca  became the  Chairman  of the Board of  Directors  of the
Company in November  1996.  Mr. Recca has been the president of Recca & Company,
Inc., a financial  consulting  firm based in New York City since 1992. Mr. Recca
is also a member and one of the three  managers of Harvey  Acquisition  Company,
LLC,  which is a principal  shareholder  of the  Company.  Mr.  Recca is also an
employee of Taglich Brothers,  D'Amadeo,  Wagner & Co., Inc., an NASD registered
broker-dealer.

     William F. Kenny,  III has been a director of the Company  since 1975.  For
the past five years Mr. Kenny has been a consultant  to Meenan Oil Co., Inc. Mr.
Kenny has also served as a director of the Empire State  Petroleum  Association,
Petroleum Research  Foundation and the East Coast Energy Council.  Mr. Kenny was
also the president of the Independent  Fuel Terminal  Operators  Association and
the Metropolitan Energy Council.

     Stewart L. Cohen was elected a director of the Company in 1997.  Mr.  Cohen
is the Chief  Executive  Officer of Paragon  Capital LLC, an asset-based  lender
providing  a  revolving  line  of  credit  facility  to the  Company  and  other
retailers. Mr. Cohen is also a managing director of The Ozer Group LLC, an asset
and business  restructuring  firm which  provides  asset  disposition,  business
evaluation,  advisory services,  and asset appraisals for financial institutions
lending primarily to retail businesses. He is also the President of U.S. Dixon's
Holdings,  Inc.  and its  non-operating  subsidiaries,  for which Mr.  Cohen was
retained to wind down the affairs of, and pursue economic  settlements  for, the
company with other parties.  Mr. Cohen is also a member of the Board of Advisors
of  Verc  Enterprises,  Inc.,  and is a  Contributing  Editor  to  the  American
Bankruptcy Institute Journal.

                                        2




<PAGE>


     Franklin  C.  Karp has been  with the  Company  since  1990.  Before  being
appointed  as the  Company's  President  in  April  1996,  Mr.  Karp  served  as
Merchandise Manager and later as vice president in charge of merchandising.  Mr.
Karp has been employed in various sales,  purchasing and management positions in
the retail consumer  electronics  business in the New York Metropolitan area for
25 years.

     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.

     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 is an  executive  officer of the  Company and  Director of
Inventory  Control.  Mr.  Hiemer has been with the Company for seven  years.  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.  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. William
F.  Kenny,  III and  Stewart  L.  Cohen  are the  current  members  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. Stewart L. Cohen and William F. Kenny, III are the current members
of the Compensation and Stock Option Committee.

                                        3




<PAGE>


     Item 10. 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>

Name of Individual                            Annual Compensation                     Long Term Compensation
and Principal Position               Year              Salary             Bonus
<S>                                  <C>              <C>                     <C>          <C>                   <C> 

                                     1997            $  0                -                   -   
Michael Recca                        1996            $  0                -                   -                     -      
   Chairman(1)                       1995            $ 

                                     1997    $        126,000            -                   -
Franklin C. Karp                     1996    $        88,000             -                   -
                                                        (2)
  President                          1995           $108,000             -                   -      

Joseph J. Calabrese,                                                                      
 Executive Vice President,           1997    $        117,000            
   Chief Financial Officer,          1996    $         82,000 (2)          
    Treasurer and Secretary          1995    $        101,000

</TABLE>


     (1) Beginning on March 1, 1998,  Mr. Recca will receive an annual salary in
the amount of $75,000 in his  capacity as the Chairman of the Board of Directors
of the Company.

     (2)  Represents  the nine month  transition  period ended October 26, 1996,
when the  Company's  fiscal  year end was  changed  to the  Saturday  closest to
October 31 from the Saturday closest to January 31.

     Severance Agreements

     The Company has entered into  substantially  similar  severance  agreements
('Severance  Agreement')  with each of  Franklin C. Karp,  Joseph J.  Calabrese,
Michael A. Beck, and Roland W. Hiemer.

     Each Severance  Agreement provides that in the event the Company is sold or
merged with another  company,  involved in a corporate  reorganization,  or if a
change of the current  management  takes place, and the party, for the foregoing
reasons,  is terminated or asked to accept a position  other than that of senior
officer  requiring  similar  responsibilities  to those that the party currently
performs, or if the current corporate office is moved to a new location which is
more than thirty miles from either Mineola, New York, or Lyndhurst,  New Jersey,
depending  on who the party is,  as a result  of a  reorganization  or change in
ownership or control, and the party declines the new position or relocation, the
Company or its successor in control will be obligated,  and continue, to pay the
party at the same salary and car allowance,  if any, the party had most recently
been earning, for a period of one year following termination

                                        4




<PAGE>



of Mr. Karp and Mr. Calabrese,  and six months for Mr. Beck and Mr. Hiemer.
In addition,  the party will be fully covered under the Company's benefit plans,
including,   without  limitation,   the  Company's  medical,  dental,  life  and
disability  insurance programs,  during the one-year period for Mr. Karp and Mr.
Calabrese and during the six month period for Mr. Beck and Mr. Hiemer (including
family coverage for medical and dental insurance).

     In  the  event  following  any  foregoing  termination  the  party  obtains
employment  at a  lesser  compensation  than  the  party's  compensation  by the
Company,  the Company will pay the party the difference between the two salaries
for the remainder of the one-year or six month period,  whichever is applicable,
plus continued coverage of the Company's benefit plans for the same period.

     Each  Severance  Agreement  also  provides  that in the  event the party 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 the party at the same salary the party has
most recently been earning, for a period of six months following termination for
Mr. Karp and Mr.  Calabrese and three months for Mr. Beck and Mr.  Hiemer,  plus
full coverage of the Company's benefits for the same period.

     Employment Agreement

     The Company will enter into a two-year  employment  agreement with Franklin
C. Karp,  the  Company's  President,  commencing  on the  effective  date of the
proposed  public  offering.  The  employment  agreement  provides  that Mr. Karp
continue as the  Company's  President  with the same  compensation  and benefits
which Mr. Karp currently receives, subject to annual adjustment to be determined
and made by the Board of Directors of the Company.

     Stock Option Plan

     In April 1997,  the  Company  adopted a stock  option plan which  currently
covers 1,000,000 shares of the Common Stock. 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 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 Company's  Compensation  and Stock Option
Committee as the Board may establish or designate  (the  "Administrators").  The
Committee shall be comprised of not less than two members, and all of whom shall
be outside directors. The members of the Compensation and Stock Option Committee
are Stewart L. Cohen and William F. Kenny III, outside directors.

     The  Administrators,  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 50,000.

     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 stockholder, 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.

     The  Compensation  and Stock Option Committee has approved the grant, as of
the Effective  Date, of ISOs to purchase an aggregate of 70,000 shares of Common
Stock to certain employees of the Company.  These Options will be exercisable as
to one-third of such shares at an exercise  price of $5.00 per share  commencing
one year from the Effective  Date, as to an additional  one-third of such shares
at an exercise price of $5.50 per share  commencing two years from the Effective
Date;  and as to an additional  one-thir of such shares at an exercise  price of
$6.00 per share  commencing  three years from the  Effective  Date  provided the
Optionee shall be employed by the Company at the time of exercise.

     Item 11. 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 January 28, 1998, 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>

                                                              Amount and Nature of
    Name and Address of Beneficial Owner                    Beneficial Ownership (2)              Percentage

<S>                                                     <C>                                        <C>   

    Harvey Acquisition Company LLC                        1,915,000  (3)                            84.8%        
      c/o Recca & Co., Inc.
      100 Wall Street, 10th Floor
      New York, NY 10005
     Michael Recca                                         1,920,000  (1) (3)                       85.0% 
      Recca & Co., Inc.
      100 Wall Street, 10th Floor
      New York, NY 10005
   Stewart L. Cohen                                           10,000                                    *  
      205 Chubb Avenue
      Lyndhurst, NJ 07071
   William F. Kenny, III                                       8,489                                    *
       Harvey Electronics, Inc
       205 Chubb Avenue
       Lyndhurst, NJ 07071
   Franklin C. Karp                                           15,000                                    * 
    Harvey Electronics, Inc
    205 Chubb Avenue
    Lyndhurst, NJ 07071
 Joseph J. Calabrese                                          10,702                                    *
  205 Chubb Avenue
  Lyndhurst, NJ 07071
 Michael A. Beck                                              7,500                                     *
    Harvey Electronics, Inc
    205 Chubb Avenue
     Lyndhurst, NJ 07071
 Roland W. Hiemer                                             2,500                                     *
      Harvey Electronics, Inc
 205 Chubb Avenue
   InterEquity Capital Partners                             141,565  (3)                              6.0%
        220 Fifth Avenue, 10th Floor
   New York, NY 10001
      All Directors and Officers as group                   1,974,191                                87.4%
      (7 Persons)
</TABLE>

     * Less than 1% of outstanding shares of Common Stock.

     (1) Includes Shares owned by HAC, of which Mr. Recca is a member and one of
three  managers.  Assumes no exercise of  outstanding  warrants,  stock  options
granted  under  the  Company's  Stock  Option  Plan,  and no  conversion  of the
outstanding Preferred Stock.

     Assumes no  exercise  of a put option  granted by HAC to  InterEquity,  the
exercise of which will allow  InterEquity  to require HAC to purchase the 51,565
shares  held by  InterEquity  for  $70,000  prior to the  Effective  Date  ("Put
Option").

     (4) Includes 90,000 Shares issuable on conversion of Preferred Stock.

     Item 12. Certain Relationships and Related Transactions.

     In 1995 and 1996, during the Company's bankruptcy  proceeding,  the Company
borrowed, in the aggregate,  approximately  $2,822,500 (the "Loan") from HAC. As
of the Effective  date of the  Company's  Reorganization  Plan,  and pursuant to
certain provisions  contained therein,  HAC's claims in connection with the Loan
was  satisfied by issuing HAC 2,000,000  shares of the  Company's  Common Stock.
Subsequently,  Michael  Recca  was  elected  as a  member  and  Chairman  of the
Company's  Board of Directors.  In connection  with the Loan, the Company paid a
$5,000 per month loan  servicing  fee, which was to be paid to Recca & Co. Inc.,
of  which  Michael  Recca  is  the  sole  shareholder,   through  October  1996.
Subsequently,  through March 1997, a $5,000 per month management fee was paid to
HAC. There was an arrearage of management  fees of  approximately  $30,000 which
was forgiven by HAC.

     Reference  is made to  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations--Liquidity  and Capital Resources" regarding
the Company's revolving line of credit facility with Paragon,  which the Company
entered into on November 5, 1997.  Stewart L. Cohen,  a director of the Company,
is the Chief Executive Officer and a director of Paragon.


     In February and March, 1997, Mr. E. H. Arnold  ("Arnold"),  a member of HAC
and a holder of  Preferred  Stock,  loaned the Company the  principal  amount of
$350,000,  with an interest rate of 12% per annum.  This loan is due on December
31, 1998 and can be prepaid without penalty.

     In November 1997, HAC transferred  85,000 shares of Common Stock to certain
employees  and  directors  of the  Company and  Arnold.  Such  transfer is to be
treated for accounting  purposes as if such shares were issued by the Company as
compensation to such persons. The Company will record compensation expense equal
to the fair  market  value of the shares (70% of the per share  public  offering
price) over a two year period, during which the shares are subject to forfeiture
by the transferees.

                                        5



<PAGE>







     Item 13. Exhibits and Reports on Form 8-K.

     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:

<TABLE>
<CAPTION>


Exhibit
Number                     Description
<S>                        <C>    

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

10.3       --              Employment Agreement with Franklin C. Karp

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 LLC
 
27.1       --              Financial Data Schedule
</TABLE>

     (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:
<TABLE>
<CAPTION>

Exhibit
Number                    Description
<S>                       <C> 

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

</TABLE>

     (b) Reports on Form 8-K

     The  Company  filed a Report  on Form 8-K dated  November  3,  1997,  which
reported events under Items 1, 3, 5, 7 and 8.

                                        6


<PAGE>



                                   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, 1998

     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, 1998
------------------------------------------
            Franklin C. Karp

        /s/ Joseph J. Calabrese             Executive Vice President, Chief Financial         January 30, 1998
------------------------------------------
          Joseph J. Calabrese               Officer, Treasurer, Secretary and Director

           /s/ Michael Recca                Chairman and Director                             January 30, 1998
------------------------------------------
             Michael Recca

       /s/ William F. Kenny, III            Director                                          January 30, 1998
------------------------------------------
         William F. Kenny, III

          /s/ Stewart L. Cohen              Director                                          January 30, 1998
------------------------------------------
            Stewart L. Cohen

</TABLE>














                                        7