U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended 9/30/97
|_| Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ___________
Commission file number 811-3584
Levcor International, Inc.
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(Exact Name or Small Business Issuer as Specified in Its Charter)
Delaware 06-0842701
- --------------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1071 Avenue of the Americas, New York, NY 10018
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(Address of Principal Executive Offices)
(203) 264-7428
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(Issuer's Telephone Number, Including Area Code)
(Former name, Former Address and Former Fiscal year, if Changes
---------------------------------------------------------------
Since Last Report)
Check whether the issuer; (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
As of October 31, 1997, 1,733,499 shares of the issuer's common stock, par
value $.56 per share, were outstanding.
Transitional Small Business Disclosure Format(check one): Yes |_| No |X|
<PAGE>
LEVCOR INTERNATIONAL, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Balance Sheet as of September 30, 1997 (Unaudited) 1
Statements of Operations for the
Nine Months Ended September 30, 1997 and
September 30, 1996 (Unaudited) 2
Statements of Operations for the
Three Months Ended September 30, 1997 and
September 30, 1996 (Unaudited) 3
Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and
September 30, 1996 (Unaudited) 4
Notes to Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 6
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LEVCOR INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 19,685
Accounts receivable 7,197
Due from factor 213,174
Inventories 792,285
Prepaid expenses 3,508
-----------
Total current assets $ 1,035,849
OIL AND GAS PROPERTIES - AT COST (using
full cost method), net of accumulated
depletion of $867,576 75,760
-----------
$ 1,111,609
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 775,915
Current maturities of long-term debt 282,800
-----------
Total current liabilities $ 1,058,715
LONG TERM DEBT, less current maturities 565,600
DUE TO OFFICER 670,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY(DEFICIENCY)
Common stock, par value $.56 per share;
authorized 15,000,000 shares, outstanding
1,733,499 shares 969,994
Capital in excess of par value 5,002,966
Accumulated deficit (7,155,666)
-----------
(1,182,706)
-----------
$ 1,111,609
===========
The accompanying notes are an integral part of these statements.
1
<PAGE>
LEVCOR INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the nine months ended September 30, 1997 1996
Revenue:
Looms Division sales $ 1,587,513 $ 2,017,770
Less: cost of sales 1,404,765 1,917,584
----------- -----------
Gross profit 182,748 100,186
Oil and gas sales 32,362 37,074
Less: cost of sales 28,308 22,700
----------- -----------
Gross profit 4,054 14,374
Interest income and royalties -- 80
----------- -----------
Total revenue 186,802 114,640
----------- -----------
Expenses:
Selling expenses: Looms Division
Salaries, benefits and payroll taxes 63,563 171,578
Commissions 32,315 114,312
Other selling expenses 70,670 34,372
----------- -----------
Total selling expenses 166,548 320,262
General and administrative expense
Salaries, benefits and payroll taxes 40,985 55,966
Accounting and administrative fees 43,606 44,147
Audit fees 16,000 21,000
Directors' fees and expenses 3,750 3,750
Factor's fees 19,179 16,909
Insurance 9,724 12,769
Interest expense 114,263 82,921
Legal fees 11,729 19,428
Transfer agent fees 3,150 6,508
Other business taxes 2,949 3,459
Other expenses 10,252 9,903
----------- -----------
Total general and
administrative expenses 275,587 276,760
Total expenses 442,135 597,022
----------- -----------
Net (loss) (255,333) (482,382)
Accumulated deficit - beginning of year (6,900,333) (6,179,662)
----------- -----------
Accumulated deficit - end of quarter $(7,155,666) $(6,662,044)
=========== ===========
Average number of shares outstanding 1,730,999 1,710,999
Net (loss) per common share $ (0.15) $ (0.28)
=========== ===========
The accompanying notes are an integral part of these statements.
2
<PAGE>
LEVCOR INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended September 30, 1997 1996
Revenue:
Looms Division sales $ 385,940 $ 589,164
Less: cost of sales 400,984 679,626
----------- -----------
Gross loss (15,044) (90,462)
Oil and gas sales 9,079 13,403
Less: cost of sales 7,799 10,233
----------- -----------
Gross profit 1,280 3,170
Total revenue (13,764) (87,292)
----------- -----------
Expenses:
Selling expenses: Looms Division
Salaries, benefits and payroll taxes 22,018 59,549
Commissions 11,861 28,732
Other selling expenses 36,656 20,234
----------- -----------
Total selling expenses 70,535 108,515
General and administrative expense
Salaries, benefits and payroll taxes 13,791 12,067
Accounting and administrative fees 14,377 14,672
Directors' fees and expenses 1,250 1,250
Factor's fees 1,179 5,317
Insurance 2,524 2,377
Interest expense 27,637 24,471
Legal fees 2,500 9,362
Transfer agent fees 1,050 1,058
Other business taxes 106 796
Other expenses 3,578 3,253
----------- -----------
Total general and
administrative expenses 67,992 74,623
Total expenses 138,527 183,138
----------- -----------
Net (loss) (152,291) (270,430)
Accumulated deficit - beginning of quarter (7,003,375) (6,391,614)
----------- -----------
Accumulated deficit - end of quarter $(7,155,666) $(6,662,044)
=========== ===========
Average number of shares outstanding 1,733,499 1,723,499
Net (loss) per common share $ (.09) $ (.16)
=========== ===========
The accompanying notes are an integral part of these statements.
3
<PAGE>
LEVCOR INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended Sept. 30, 1997 1996
Cash flows from operating activities
Net (loss) $(255,333) $(482,382)
Adjustments to reconcile (net loss) to net
cash (used in) operating activities:
Depletion and depreciation 10,055 5,783
Services paid in common stock 5,000 25,000
Changes in operating assets and liabilities,
net of assets acquired
Accounts receivable 617 (2,508)
Due from factor 131,329 (56,698)
Inventories 84,035 361,894
Prepaid expenses 6,068 15,563
Accounts payable and accrued expenses 15,810 40,584
--------- ---------
Net cash (used in) operating activities (2,419) (92,764)
Cash flows from investing activities
Proceeds on sale of property - net -- 14,822
--------- ---------
Net cash provided by investing activities -- 14,822
Cash flows from financing activities
Advances from shareholder 300,000 (30,000)
Payment of long term debt (282,800) 87,200
--------- ---------
Net cash provided by financing activities 17,200 57,200
--------- ---------
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 14,781 (20,742)
Cash and cash equivalents at beginning of year 4,904 26,296
--------- ---------
Cash and cash equivalents at end of quarter $ 19,685 $ 5,554
========= =========
Supplement disclosures of cash flow information:
Cash paid during the year for
Interest $ 114,263 $ 82,921
The accompanying notes are an integral part of these statements.
4
<PAGE>
LEVCOR INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
NOTE 1. The accompanying financial statements of Levcor International,
Inc. (the "Company") have been prepared in accordance with the
instructions to Form 10-QSB and do not include all the information
and footnote disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1997 are
not necessarily indicative of the results that may be expected for
the year ending December 31, 1997. These statements should be read
in conjunction with the financial statements and related notes
included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1996.
NOTE 2. New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per
Share, which is effective for financial statements for both interim
and annual periods ending after December 15, 1997. The new standard
eliminates primary and fully diluted earnings per common share and
requires presentation of basic and if applicable diluted earnings
per common share. Basic earnings per common share is computed by
dividing income available to common shareholders by the
weighted-average common shares outstanding for the period. Diluted
earnings per common share reflects the weighted-average common
shares outstanding and dilutive potential common shares such as
stock options. The adoption of this new standard is not expected to
have a material impact on the disclosure of earnings per common
share in the financial statements.
5
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Results of Operation:
The following discussion should be read in conjunction with the Financial
Statements of Levcor International, Inc. (the "Company") and the Notes thereto
appearing elsewhere in this report.
Nine months ended September 30, 1997 as compared to nine months ended September
30, 1996.
The Company's revenues for the nine months ended September 30, 1997 were
$186,802 an increase of $72,162, or 63%, from $114,640 for the same period in
1996. Such decrease was attributable to the net of (i) an increase of $82,562 in
sales, less the cost of goods sold, from the Looms Division in the first nine
months of 1997 compared to the same period in 1996, and (ii) a decrease of
$10,320 in sales, less the cost of goods sold, from oil and gas operations in
the first nine months of 1997 compared to the same period in 1996.
The Company's expenses for the first nine months of 1997 were $442,135, a
decrease of $154,887, or 26%, from $597,022 for the same period in 1996. Such
decrease was due primarily to a decrease in selling expenses of the Looms
Division in the first nine months of 1997 of $153,714, or 48%, compared to the
same period in 1996.
As a result of the foregoing, the Company incurred a net loss of $255,333
in the first nine months of 1997, a decrease of $227,049, or 47%, from a net
loss of $482,382 for the same period in 1996.
Three months ended September 30, 1997 as compared to three months ended
September 30, 1996.
The Company's revenues for the three months ended September 30, 1997
reflected a gross loss of $13,764, a decrease of $73,528, or 84%, from a gross
loss of $87,292 for the same period in 1996. Such decrease was primarily
attributable to a decrease in gross loss of $75,418 in sales, less the cost of
goods sold, from the Looms Division in the third quarter of 1997 compared to the
same period in 1996.
The Company's expenses for the third quarter of 1997 were $138,527, a
decrease of $44,611, or 24%, from $183,138 in the same period in 1996. Such
decrease was due primarily to a decrease in selling expenses of the Looms
Division in the third quarter of 1997 of $37,980, or 35%, as compared to the
same period in 1996, and a decrease in general and administrative expenses in
the third quarter of 1997 of $6,631, or 9%, compared to the same period in 1996.
As a result of the foregoing, the Company incurred a net loss of $152,291
in the third quarter of 1997, a decrease of $118,139, or 44%, from a net loss of
$270,430 for the same period in 1996.
6
<PAGE>
Liquidity and Capital Resources
The primary source of the Company's working capital during the first nine
months of 1997 was derived from proceeds from the sale of woven fabrics produced
by the Company's Looms Division and, to a lesser extent, proceeds from the sale
of oil and gas from the Company's ownership interest in oil and gas wells. The
Company's unrestricted cash and cash equivalents increased from $4,904 at
December 31, 1996 to $19,685 at September 30, 1997.
In connection with the operation of the Looms Division, the Company
entered into a Factoring Agreement with NationsBanc Commercial Corporation
("NationsBanc") as of June 1, 1995 (the "Factoring Agreement") which was
subsequently amended effective September 1, 1996 and January 1, 1997. Pursuant
to the terms of the Factoring Agreement, the Company has agreed to assign to
NationsBanc its interest in all receivables derived from the sale of the woven
fabrics produced by the Looms Division and may request from NationsBanc advances
up to 95% of the net purchase price of such receivables, upon which the Company
would pay interest of 1% above NationsBanc's prime rate. The Factoring Agreement
has an initial term expiration date of September 1, 1998 but is automatically
renewed for two-year periods thereafter unless terminated on the initial term
expiration date (or any anniversary thereof) by either party giving not less
than sixty days prior written notice.
The Company continues to sustain substantial losses which have adversely
affected the Company's liquidity. In addition, in connection with the purchase
of the Company's woven fabric inventory from Andrex Industries Corp. ("Andrex")
in May, 1995, the Company is obligated to make annual debt payments of
approximately $283,000 to Andrex through 2000 pursuant to a promissory note
issued by the Company to Andrex, which note bears interest at the rate of 6% per
annum. In order to meet the $282,800 debt payments due on May 1, 1996 and 1997,
Robert A. Levinson, the Chief Executive Officer of the Company, made loans to
the Company on such dates of $370,000 and $300,000, respectively, at an interest
rate of 6% per annum, for which no repayment date has yet been set. Mr. Levinson
has agreed to continue to personally support the Company's cash requirements to
enable it to meet its current obligations through December 31, 1997. Although
there can be no assurances that these measures will be successful, the Company
believes that its current operations and the financial arrangements described
above will provide sufficient liquidity to fund the Company's operations through
the remainder of 1997.
Seasonality
The Company's Looms Division business is seasonal and typically realizes
higher revenues and operating income in the first and fourth calendar quarters
which, considering the standard lead time required by the fashion industry to
manufacture apparel, would correspond respectively to the autumn and spring
retail selling seasons.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8 - K.
(a) The following exhibit is included herein:
Exhibit 27 - Financial Data Schedule (Article 5), included for
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) purposes
only. This Schedule contains summary financial information extracted
from the balance sheets and statements of operations and deficit as
of and for the nine months ended September 30, 1997 and is qualified
in its entirety by reference to such financial statements.
(b) No reports on Form 8-K were filed during the quarter for which this
report is being filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LEVCOR INTERNATIONAL, INC.
Date November 12, 1997 /s/ Robert A. Levinson
------------------------------
Robert A. Levinson
President
Date November 12, 1997 /s/ Rudolph E. Bremser
------------------------------
Rudolph E. Bremser
Treasurer
8
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 19,685
<SECURITIES> 0
<RECEIVABLES> 220,371
<ALLOWANCES> 0
<INVENTORY> 792,285
<CURRENT-ASSETS> 1,035,849
<PP&E> 943,336
<DEPRECIATION> 867,576
<TOTAL-ASSETS> 1,111,609
<CURRENT-LIABILITIES> 1,058,715
<BONDS> 1,235,600
0
0
<COMMON> 969,994
<OTHER-SE> (2,152,700)
<TOTAL-LIABILITY-AND-EQUITY> 1,111,609
<SALES> 1,619,875
<TOTAL-REVENUES> 186,802
<CGS> 1,433,073
<TOTAL-COSTS> 1,875,208
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114,263
<INCOME-PRETAX> (255,333)
<INCOME-TAX> 0
<INCOME-CONTINUING> (255,333)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (255,333)
<EPS-PRIMARY> 0
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</TABLE>
