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 3/31/97
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| | Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ______________
Commission file number 811-3584
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Levcor International, Inc.
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(Exact Name or Small Business Issuer as Specified in Its Charter)
Delaware 06-0842701
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(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)
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(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
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As of May 12, 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
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<PAGE>
LEVCOR INTERNATIONAL, INC.
INDEX
Part I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Balance Sheet as of March 31, 1997 (Unaudited) 1
Statements of Operations and Deficit for the
Three Months Ended March 31, 1997 and
March 31, 1996 (Unaudited) 2
Statements of Cash Flows for the
Three Months Ended March 31, 1997 and
March 31, 1996 (Unaudited) 3
Notes to Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 5,6
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LEVCOR INTERNATIONAL, INC.
BALANCE SHEET
March 31, 1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 22,319
Accounts receivable 2,359
Due from factor 142,835
Inventories 788,322
Prepaid expenses 2,634
-----------
Total current assets 958,469
OIL AND GAS PROPERTIES - AT COST (using full cost method),
net of accumulated depletion of $ 860,815
82,521
$ 1,040,990
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 459,691
Current maturities of long-term debt 282,800
-----------
Total current liabilities 742,941
LONG TERM DEBT, less current maturities 848,400
DUE TO OFFICER 370,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY(DEFICIENCY)
Common stock, par value $.56 per share;
authorized 15,000,000 shares, outstanding
1,733,499 shares 969,994
Capital in excess of par value 5,002,966
Accumulated deficit (6,892,861)
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(919,901)
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$ 1,040,990
===========
The accompanying notes are an integral part of these statements.
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<PAGE>
LEVCOR INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended March 31, 1997 1996
Revenue:
Looms Division sales 814,713 1,060,226
Less: cost of sales 644,765 899,400
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Gross profit 169,948 160,826
Oil and gas sales 13,079 11,674
Less: cost of sales 12,381 13,464
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Gross profit / (loss) 698 (1,790)
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170,646 159,036
Expenses:
Selling expenses: Looms Division
Salaries, benefits and payroll taxes 19,820 50,058
Commissions 10,607 56,221
Other selling expenses 21,434 2,821
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51,861 109,100
General and administrative expense
Salaries, benefits and payroll taxes 13,527 21,224
Accounting and administrative fees 14,648 14,227
Audit fees 8,000 20,000
Directors' fees and expenses 1,250 1,250
Factor's fees 12,783 7,335
Insurance 3,600 5,242
Interest expense 47,941 29,370
Legal fees 2,500 4,500
Transfer agent fees 1,050 4,150
Other business taxes 2,834 1,968
Other expenses 3,180 4,628
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Total general and administrative expenses 111,313 113,894
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Total expense 163,174 222,994
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Net earnings / (loss) 7,472 (63,958)
Accumulated deficit - beginning of year (6,900,333) (6,179,662)
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Accumulated deficit - end of quarter (6,892,861) (6,243,620)
========== ==========
Average number of shares outstanding 1,728,499 1,698,499
Net earnings / (loss) per common share -- ($.04)
========== ==========
The accompanying notes are an integral part of these statements.
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<PAGE>
LEVCOR INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended March 31, 1997 1996
Cash flows from operating activities
Net profit / (loss) $ 7,472 ($ 63,958)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depletion and depreciation 3,294 3,086
Services paid in common stock 5,000 25,000
Changes in operating assets and liabilities,
net of assets acquired
Accounts receivable 5,455 34,312
Due from factor 201,668 (271,394)
Inventories 87,998 273,534
Prepaid expenses 6,942 19,684
Accounts payable and accrued expenses (300,414) 408
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Net cash provided by operating activities 17,415 20,672
Cash flows from financing activities
Repayment of advances from shareholder -- (30,000)
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Net cash provided by financing activities -- (30,000)
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NET INCREASE / (DECREASE) IN CASH
AND CASH EQUIVALENTS 17,415 (9,328)
Cash and cash equivalents at beginning of year 4,904 26,296
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Cash and cash equivalents at end of quarter $ 22,319 $ 16,968
======== =========
Supplemental disclosures of cash flow information:
Cash paid during the quarter for
Interest $ 25,423 $ 29,370
The accompanying notes are an integral part of these statements.
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<PAGE>
LEVCOR INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 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 three
months ended March 31, 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.
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<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Results of Operations:
Three months ended March 31, 1997 as compared to three months ended March
31, 1996.
The Company's revenues for the three months ended March 31, 1997 were
$170,646, an increase of $11,610, or 7%, from $159,036 for the same period in
1996. Such increase was attributed to (i) an increase of $9,122 in sales, less
the cost of goods sold, from the Looms Division in the first quarter of 1997
compared to the same period in 1996, and (ii) an increase of $2,488 in sales,
less the cost of goods sold from oil and gas operations in the first quarter of
1997 compared to the same period in 1996.
The Company's expenses for the first quarter of 1997 were $163,174, a
decrease of $59,820, or 27%, from $222,994 in the same period in 1996. Such
decrease was due primarily to a decrease in selling expenses of the Looms
Division in the first quarter of 1997 of $57,239, or 52%, compared to the same
period in 1996, and, to a lesser extent, a decrease in general and
administrative expenses in the first quarter of 1997 of $2,581, or 2%, compared
to the same period in 1996.
As a result of the foregoing, the Company reflected a net profit of $7,472
in the first three months of 1997 compared to a net loss of $63,958 for the same
period in 1996.
Liquidity and Capital Resources
The primary source of the Company's working capital during the first
quarter 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 $22,319 at March 31, 1997.
In connection with the operation of the Looms Division, the Company
entered into a Factoring Agreement with NationsBanc Commercial Cooperation
("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, among other things, (i)
has agreed to (a) assign to NationsBanc its interest in all receivables derived
from the sale of the woven fabrics produced by the Looms Division and (b) pay
NationsBanc a commission of 1% of the gross amount on such receivables, with a
minimum commission of $36,000 for the period June 1, 1995 to December 31, 1996
and no minimum annual commission thereafter and (ii) may (a) request advances up
to 95% of the net purchase price of the receivables and (b) pay interest on such
advances at the rate of 0.5% above NationsBanc's prime rate for the period June
1, 1995 to August 31, 1996 and at 1% above such prime rate thereafter. The
amended Factoring Agreement has an initial term expiration date of September 1,
1998 and
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<PAGE>
is renewable 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 woven fabric inventory, the Company issued a promissory note to Andrex in
May 1996, which bears interest at the rate of 6% per annum pursuant to which the
Company, commencing on May 1, 1996, and continuing through May 1, 2000, is
required to make five annual debt payments of approximately $283,000 to Andrex.
In order to meet the $282,800 debt payment that was due on May 1, 1996, Robert
A. Levinson, the Chief Executive Officer of the Company, made a loan to the
Company of $370,000 on such date at a rate of 6% per annum, for which no
repayment date has yet been set, and 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
fiscal 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.
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<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 sheet and statements of
operations and deficit as of and for the three months ended March 31, 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.
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<PAGE>
SIGNATURES
LEVCOR INTERNATIONAL, INC.
-----------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date May 12, 1997 /s/ Robert A. Levinson
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Robert A. Levinson
President
Date May 12,1997 /s/ Rudolph E. Bremser
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Rudolph E. Bremser
Treasurer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-QSB
for the Quarterly Period Ended March 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 22,319
<SECURITIES> 0
<RECEIVABLES> 145,194
<ALLOWANCES> 0
<INVENTORY> 788,322
<CURRENT-ASSETS> 958,469
<PP&E> 943,336
<DEPRECIATION> 860,815
<TOTAL-ASSETS> 1,040,990
<CURRENT-LIABILITIES> 742,941
<BONDS> 1,218,400
0
0
<COMMON> 969,994
<OTHER-SE> (1,889,895)
<TOTAL-LIABILITY-AND-EQUITY> 1,040,990
<SALES> 827,792
<TOTAL-REVENUES> 170,646
<CGS> 657,146
<TOTAL-COSTS> 820,320
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,941
<INCOME-PRETAX> 7,472
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,472
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
