Harvey Electronics, Inc. is engaged in the retail sale, service and custom installation of audio, video and home theater equipment in the Metropolitan New York area. The Company's equipment includes high-fidelity components and systems, digital versatile disc players (DVD), digital video recorders (DVR), high-definition television (HDTV), plasma flat-screen, liquid crystal display (LCD) flat panel and digital light processing (DLP) television sets, integrated remote controls, audio/video furniture, conventional telephones, moving picture experts group layer-3 (MP3) players, iPods, satellite and analog radios, service contracts and related accessories. As of October 30, 2005, the Company operated nine locations, consisting of eight Harvey specialty retail stores and one Bang & Olufsen branded stores. There are two Harvey locations in Manhattan and six suburban locations in Paramus, New Jersey; Mt. Kisco, in Westchester, New York; Greenwich, Connecticut; Greenvale/Roslyn, on the north shore of Long Island, New York; Eatontown, New Jersey, and its newest store in Bridgewater, New Jersey, which opened in June 2005. The Company offers its customers a variety of 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). Harvey is a retailer of esoteric brands manufactured by Bang & Olufsen, Crestron, Lexicon, Linn, Marantz, McIntosh, NAD, Vienna Acoustics, Sonus Faber, Krell, Loewe, Martin Logan and Fujitsu. The Company's stores are designed to offer a pleasing environment and to display its products and custom installation services in realistic home settings commonly known in the industry as lifestyle home vignettes. During the fiscal year ended October 29, 2005 (fiscal 2005), the Company's audio product sales represented approximately 48% of the Company's net sales and yielded gross profit margins of approximately 42%. The Company's video product sales represented approximately 42% of the Company's net sales and yielded gross profit margins of approximately 30%. The Company also provides installation services for the products it sells. Custom installation, as commonly referred to in the industry, includes both equipment sales and labor income. Custom installation of both equipment and related labor accounted for approximately 63% of the Company's net sales in fiscal 2005. The labor portion of custom installation presently represents approximately 10% of net sales. The Company also sells extended warranties on behalf of third party providers. Sales of extended warranties yield higher gross profit margins and represented approximately 4% of the Company's overall net sales. In fiscal 2000, Harvey launched its Website, www.harveyonline.com to support the continued growth of its exclusive consumer electronics and custom home theater installation showrooms. The Website was designed to extend Harvey's in-store experience onto the Internet as a vehicle to increase customer traffic at the Company's retail locations. Online sales, which are insignificant, are available around-the-clock and are a secondary goal of the Website. Harvey customers can order online within the Company's trading area in the metropolitan New York marketplace. Visitors to the Website are able to leave inquiries, request home theater systems based on budget and room size, reserve equipment or schedule an in-home or in-store consultation with a Harvey professional. Harvey has entered into dealer agreements with primarily all of its vendors. Under each dealer agreement, it 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. The Company competes with Circuit City, Best Buy, including P.C. Richard & Son, J&R Music World and 6th Avenue Electronics.

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