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 6/30/97
|_| 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.
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(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 July 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 June 30, 1997 (Unaudited) 1
Statements of Operations for the
Six Months Ended June 30, 1997 and
June 30, 1996 (Unaudited) 2
Statements of Operations for the
Three Months Ended June 30, 1997 and
June 30, 1996 (Unaudited) 3
Statements of Cash Flows for the
Six Months Ended June 30, 1997 and
June 30, 1996 (Unaudited) 4
Notes to Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on From 8-K 8
Signatures 8
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LEVCOR INTERNATIONAL, INC.
BALANCE SHEET
June 30, 1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 17,197
Accounts receivable 4,144
Due from factor 142,505
Inventories 792,771
Prepaid expenses 4,474
-----------
Total current assets $ 961,091
OIL AND GAS PROPERTIES - AT COST (using
full cost method), net of accumulated
depletion of $864,912 78,424
-----------
$ 1,039,515
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 551,530
Current maturities of long-term debt 282,800
-----------
Total current liabilities 834,330
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 (7,003,375)
-----------
(1,030,415)
-----------
$ 1,039,515
===========
The accompanying notes are an integral part of these statements.
1
<PAGE>
LEVCOR INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the six months ended June 30, 1997 1996
----------- -----------
Revenue:
Looms Division sales $ 1,201,573 $ 1,428,606
Less: cost of sales 1,003,781 1,237,958
----------- -----------
Gross profit 197,792 190,648
Oil and gas sales 23,283 23,671
Less: cost of sales 20,509 12,467
----------- -----------
Gross profit(loss) 2,774 11,204
Interest income and royalties -- 80
----------- -----------
Total revenue 200,566 201,932
----------- -----------
Expenses:
Selling expenses: Looms Division
Salaries, benefits and payroll taxes 41,545 112,029
Commissions 20,454 85,580
Other selling expenses 34,014 14,138
----------- -----------
Total selling expenses 96,013 211,747
General and administrative expense
Salaries, benefits and payroll taxes 27,194 43,899
Accounting and administrative fees 29,229 29,475
Audit fees 16,000 21,000
Directors' fees and expenses 2,500 2,500
Factor's fees 18,000 11,592
Insurance 7,200 10,392
Interest expense 86,626 58,450
Legal fees 9,229 10,066
Transfer agent fees 2,100 5,450
Other business taxes 2,843 2,663
Other expenses 6,674 6,650
----------- -----------
Total general and
administrative expenses 207,595 202,137
Total expenses 303,608 413,884
----------- -----------
Net (loss) (103,042) (211,952)
Accumulated deficit - beginning of year (6,900,333) (6,179,662)
----------- -----------
Accumulated deficit - end of quarter $(7,003,375) $(6,391,614)
=========== ===========
Average number of shares outstanding 1,730,166 1,706,832
Net (loss) per common share $ (.06) $ (.12)
=========== ===========
The accompanying notes are an integral part of these statements.
2
<PAGE>
LEVCOR INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended June 30, 1997 1996
----------- -----------
Revenue:
Looms Division sales $ 386,860 $ 368,380
Less: cost of sales 359,016 338,558
----------- -----------
Gross profit 27,844 29,822
Oil and gas sales 10,204 11,997
Less: cost of sales 8,128 (997)
----------- -----------
Gross profit(loss) 2,076 12,994
Interest income and royalties -- 80
----------- -----------
Total revenue 29,920 42,896
----------- -----------
Expenses:
Selling expenses: Looms Division
Salaries, benefits and payroll taxes 21,725 61,971
Commissions 9,847 29,359
Other selling expenses 12,580 11,317
----------- -----------
Total selling expenses 44,152 102,647
General and administrative expense
Salaries, benefits and payroll taxes 13,667 22,675
Accounting and administrative fees 14,581 15,248
Audit fees 8,000 1,000
Directors' fees and expenses 1,250 1,250
Factor's fees 5,217 4,257
Insurance 3,600 5,150
Interest expense 38,685 29,080
Legal fees 6,729 5,566
Transfer agent fees 1,050 1,300
Other business taxes 9 695
Other expenses 3,494 2,022
----------- -----------
Total general and
administrative expenses 96,282 88,243
Total expenses 140,434 190,890
----------- -----------
Net (loss) (110,514) (147,994)
Accumulated deficit - beginning of quarter (6,892,861) (6,243,620)
----------- -----------
Accumulated deficit - end of quarter $(7,003,375) $(6,391,614)
=========== ===========
Average number of shares outstanding 1,733,499 1,723,499
Net (loss) per common share $ (.06) $ (.09)
=========== ===========
The accompanying notes are an integral part of these statements.
3
<PAGE>
LEVCOR INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the six months ended June 30, 1997 1996
--------- ---------
Cash flows from operating activities
Net (loss) $(103,042) $(211,952)
Adjustments to reconcile (net loss) to net
cash (used in) operating activities:
Depletion and depreciation 7,391 5,763
Services paid in common stock 5,000 25,000
Changes in operating assets and liabilities,
net of assets acquired
Accounts receivable 3,670 23,504
Due from factor 201,998 (33,272)
Prepaid expenses 5,102 20,639
Accounts payable and accrued expenses (208,575) (162,245)
--------- ---------
Net cash (used in) operating activities (4,907) (76,428)
Cash flows from financing activities
Advances from shareholder 300,000 340,000
Payment of long term debt (282,800) (282,800)
--------- ---------
Net cash provided by financing activities 17,200 57,200
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 12,293 (19,228)
Cash and cash equivalents at beginning of year 4,904 26,296
--------- ---------
Cash and cash equivalents at end of quarter $ 17,197 $ 7,068
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $ 86,626 $ 58,450
The accompanying notes are an integral part of these statements.
4
<PAGE>
LEVCOR INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 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 six
months ended June 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 Operations
Results of Operations:
Six months ended June 30, 1997 as compared to six months ended June 30,
1996.
The Company's revenues for the six months ended June 30, 1997 were
$200,566 a decrease of $1,366, or less than 1%, from $201,932 for the same
period in 1996. Such decrease was attributable to the net of (i) an increase of
$7,144 in sales, less the cost of goods sold, from the Looms Division in the
first six months of 1997 compared to the same period in 1996, and (ii) a
decrease of $8,430 in sales, less the cost of goods sold, from oil and gas
operations in the first six months of 1997 compared to the same period in 1996.
The Company's expenses for the first six months of 1997 were $303,608, a
decrease of $110,276, or 27%, from $413,884 in the same period in 1996. Such
decrease was due to a decrease in selling expenses of the Looms Division in the
first six months of 1997 of $115,734, or 55%, compared to the same period in
1996, which was partially offset by an increase in general and administrative
expenses in the first six months of 1997 of $5,458, or 3%, compared to the same
period in 1996.
As a result of the foregoing, the Company incurred a net loss of $103,042
in the first six months of 1997, a decrease of $108,910 or 51%, from $211,952
for the same period in 1996.
Three months ended June 30, 1997 as compared to three months ended June
30, 1996.
The Company's revenues for the three months ended June 30, 1997 were
$29,920, a decrease of $12,976, or 30%, from $42,896 for the same period in
1996. Such decrease was attributable to (i) a decrease of $1,978 in sales, less
the cost of goods sold, from the Looms Division in the second quarter of 1997
compared to the same period in 1996, and (ii) a decrease of $10,918 in sales,
less the cost of goods sold, from oil and gas operations in the second quarter
of 1997 compared to the same period in 1996.
The Company's expenses for the second quarter of 1997 were $140,434, a
decrease of $50,456, or 26%, from $190,890 in the same period in 1996. Such
decrease was due primarily to a decrease in selling expenses of the Looms
Division in the second quarter of 1997 of $58,495, or 57%, as compared to the
same period in 1996, partially offset by an increase in general and
administrative expenses in the second quarter of 1997 of $8,039, or 9%, compared
to the same period in 1996.
As a result of the foregoing, the Company incurred a net loss of $110,514
in the second quarter of 1997, a decrease of $37,480 or 25%, from $147,994 for
the same period in 1996.
6
<PAGE>
Liquidity and Capital Resources
The primary source of the Company's working capital during the first six
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 $17,197 at June 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 of 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 amended
Factoring Agreement has an initial expiration date of September 1, 1998 but is
automatically renewed for two-year periods thereafter unless terminated on the
initial 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 woven fabric inventory, 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. The Company also plans to continue to aggressively market and
sell its woven fabric product. 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 experiences typically
higher revenues and operating income in the first and fourth calendar quarter
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 six months ended June 30, 1997 and incorporated 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 August 12, 1997 /s/ Robert A. Levinson
---------------------------------
Robert A. Levinson
President
Date August 12, 1997 /s/ Rudolph E. Bremser
---------------------------------
Rudolph E. Bremser
Treasurer
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-QSB
for the six months ended June 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 17,197
<SECURITIES> 0
<RECEIVABLES> 146,649
<ALLOWANCES> 0
<INVENTORY> 792,771
<CURRENT-ASSETS> 961,091
<PP&E> 943,336
<DEPRECIATION> 864,912
<TOTAL-ASSETS> 1,039,515
<CURRENT-LIABILITIES> 834,330
<BONDS> 1,235,600
0
0
<COMMON> 969,994
<OTHER-SE> (2,000,409)
<TOTAL-LIABILITY-AND-EQUITY> 1,039,515
<SALES> 1,224,856
<TOTAL-REVENUES> 200,566
<CGS> 1,024,290
<TOTAL-COSTS> 1,327,898
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86,626
<INCOME-PRETAX> (103,042)
<INCOME-TAX> 0
<INCOME-CONTINUING> (103,042)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (103,042)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
