FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-17286
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LIFSCHULTZ INDUSTRIES, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE No. 87-0448118
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
641 West 59th Street, New York, NY 10019
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(Address of principal executive offices)
(212) 397-7788
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(Issuer's telephone number)
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Not Applicable
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(Former name, former address and former fiscal year, if
changed 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 -----
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 55,569,495 shares of
Common Stock outstanding as of December 1, 1997.
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PART I- FINANCIAL INFORMATION
Item 1. Financial Statements
Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
October 31, 1997 and July 31, 1997
ASSETS
31-Oct-97 31-Jul-97
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CURRENT ASSETS
Cash and cash equivalents $1,204,000 $ 901,000
Marketable securities 581,000 576,000
Trade accounts receivable, net 1,873,000 1,838,000
Related party receivable 14,000 30,000
Deferred income taxes 238,000 238,000
Inventories 2,022,000 1,888,000
Other current assets 180,000 142,000
---------- ----------
Total current assets 6,112,000 5,613,000
PROPERTY HELD FOR LEASE, NET 2,441,000 2,566,000
PROPERTY AND EQUIPMENT, NET 884,000 876,000
DEFERRED INCOME TAXES 542,000 542,000
---------- ----------
$9,979,000 $9,597,000
========== ==========
The accompanying note is an integral part of these statements.
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
October 31, 1997 and July 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
31-Oct-97 31-Jul-97
--------- ---------
CURRENT LIABILITIES
Notes payable to banks $ 200,000 $ 153,000
Trade accounts payable 876,000 473,000
Income taxes payable 133,000 101,000
Accrued liabilities 810,000 1,157,000
Note payable to shareholder 40,000 50,000
Current maturities of long-term obligation 24,000 22,000
---------- ----------
Total current liabilities $2,083,000 $1,956,000
LONG-TERM OBLIGATION, less current maturities 98,000 101,000
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Convertible preferred stock, par value $0.01;
authorized 4,900,000 shares
Series A; issued and outstanding 5,200 shares - -
Series E; issued and outstanding 21,231 shares - -
Common stock, par value $0.001; authorized
80,000,000 shares; issued and outstanding,
55,569,495 shares issued in October 31 and
55,569,495 in July 31 56,000 56,000
Additional paid-in capital 10,987,000 10,987,000
Common stock subscriptions receivable from
related parties (15,000) (15,000)
Treasury stock, at cost (1,128,000 common shares) (157,000) (157,000)
Accumulated deficit (3,073,000) (3,331,000)
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Total shareholders' equity 7,798,000 7,540,000
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$9,979,000 $9,597,000
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The accompanying note is an integral part of these statements.
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
For the three months ended October 31,
(unaudited)
1997 1996
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Net revenues $3,659,000 $2,699,000
Costs and expenses:
Cost of products sold 1,940,000 1,358,000
Selling, general and administrative 1,330,000 946,000
Research and development 77,000 84,000
Interest expense 13,000 13,000
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3,360,000 2,401,000
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Earnings before income taxes 299,000 298,000
Income tax expense 41,000 25,000
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NET EARNINGS $258,000 $273,000
========== ==========
Net earnings per common and common
equivalent share:
Net earnings $0.005 $0.005
========== ==========
Weighted average number of shares
outstanding 58,061,000 60,559,000
The accompanying note is an integral part of these statements.
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended October 31,
1997 1996
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Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net Earnings $258,000 $273,000
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and amortization 32,000 127,000
Amortization of leasehold interest 124,000 119,000
Changes in assets and liabilities:
Accounts receivable (19,000) (140,000)
Inventories (134,000) (97,000)
Other current assets (38,000) (1,000)
Accounts payable 403,000 220,000
Accrued liabilities (347,000) (1,073,000)
Income taxes payable 32,000 -
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Total Adjustments 53,000 (845,000)
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Net cash provided by (used in
operating activities 311,000 (572,000)
Cash flows from investing activities
Purchase of property and equipment (39,000) (171,000)
Purchase of marketable securities (169,000) (367,000)
Proceeds from maturities of marketable securities 164,000 -
Net cash used in investing
activities (44,000) (538,000)
Cash flows from financing activities
Principal payments on long-term obligations (1,000) -
Principal payments on note payable to shareholder (10,000) -
Cash received from issuance of long-term debt - 92,000
Net change in line of credit 47,000 224,000
Issue of common stock - 2,000
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Net cash provided by financing
activities 36,000 318,000
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Net increase (decrease) in cash and cash
equivalents 303,000 (792,000)
Cash and cash equivalents at beginning of quarter 901,000 1,424,000
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Cash and cash equivalents at end of quarter $1,204,000 $ 632,000
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Supplemental disclosures of cash flow information
- -------------------------------------------------
Cash paid during the quarter for
Interest $ 7,000 $ 12,000
Income Taxes 8,000 92,000
The accompanying note is an integral part of these statements.
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Notes to Financial Statements
(unaudited)
Note 1
The consolidated financial statements have been prepared by the
Lifschultz Industries, Inc. (the "Company") without audit, in accordance with
generally accepted accounting principles. Pursuant to the rules and
regulations of the Securities and Exchange Commission, certain disclosures
normally included in consolidated financial statements prepared in accordance
with generally accepted accounting principles have been omitted or condensed.
It is management's belief that the disclosures made are adequate to make the
information presented not misleading and reflect all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of
financial position and results of operations for the periods presented. The
results of operations for the periods presented should not be considered as
necessarily indicative of operations for the full year. It is recommended
that these consolidated financial statements be read in conjunction with the
consolidated financial statements for the year ended July 31, 1997 and the
notes thereto included in the Company's Form 10-KSB.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations:
- ----------------------
Total revenues for Lifschultz Industries, Inc. and its subsidiaries
("Lifschultz Industries") in its first quarter, ended October 31, 1997,
increased 35.6% to $3,659,000 versus $2,699,000 for the same period last year.
Revenues for Lifschultz Industries' subsidiary, Hart Scientific (including
Hart Scientific's subsidiary, Calorimetry Sciences) were $3,482,000 for the
first quarter compared to $2,594,000 for the same period last year. Increased
revenues were due to improved overall sales by Hart Scientific.
Hart Scientific's gross margins were 44% for the current period versus 48% for
the same period last year. Product mix accounts for the lower margins.
General and Administrative costs for Hart Scientific in the first quarter were
$737,000 versus $497,000 for the same period last year, $164,000 for
Lifschultz Industries' subsidiary Lifschultz Fast Freight versus $175,000 for
the same period last year, and $1,000 for Lifschultz Industries versus $33,000
for the same period last year. General and Administrative costs increased at
Hart as Hart added support personnel to keep pace with its growth,
compensation was increased to keep a competitive salary and wages structure,
and some one time costs were incurred for miscellaneous items associated with
growth.
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Research and Development costs decreased to $77,000 in the first quarter
versus $84,000 for the same period last fiscal year. Hart Scientific continues
its efforts to develop and introduce new products.
Hart Scientific had $326,000 in marketing costs in the first quarter versus
$306,000 for the same period last year. Hart continues to be aggressive in its
efforts to market new products and expand distribution of existing products.
Net consolidated earnings decreased 5.5% to $258,000 in the first quarter
versus $273,000 in the same period last year. Earnings before income taxes for
the current quarter were almost exactly the same as the same period last year
but there were slightly higher income tax costs for the current quarter.
Despite the increase in revenues, net earnings remained about the same for the
current quarter versus the same period last year because of lower margins
caused by product mix changes and higher General and Administrative costs.
Hart Scientific's net profit for the first quarter was $354,000 versus
$312,000 for the same period last year.
Financial Condition and Liquidity
- ---------------------------------
The Company's current ratio at October 31, 1997 is 2.93 to 1 versus 2.87 to 1
at July 31, 1997. The current ratio improved to 2.93 to 1 at the end of the
current first quarter versus 2.51 on October 31, 1996.
Management expects that internal operating cash flow from Hart Scientific and
from certain subleases held by Lifschultz Fast Freight will be sufficient to
meet the cash needs of the Company. Hart Scientific currently has
approximately $575,000 remaining on its bank line of credit if these funds are
required. The foregoing forward-looking statement is subject to risks and
uncertainties including but not limited to competitive pressures, inflation,
currency exchange fluctuations, changes in tariff and freight rates, capital
market conditions, and other risks. Actual results may materially differ from
anticipated results described in such statement.
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PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.0 Financial Data Schedule
(b) Exhibits
No reports on From 8-K were filed by the Company during the quarter
ended October 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIFSCHULTZ INDUSTRIES, INC.
Date 15 December 1997 By:/s/ DENNIS R. HUNTER
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Dennis R. Hunter
President and Chief
Financial Officer
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> $1,204,000
<SECURITIES> $581,000
<RECEIVABLES> $1,887,000
<ALLOWANCES> 0
<INVENTORY> $2,022,000
<CURRENT-ASSETS> $6,112,000
<PP&E> $3,325,000
<DEPRECIATION> 0
<TOTAL-ASSETS> $9,979,000
<CURRENT-LIABILITIES> $2,083,000
<BONDS> 0
0
0
<COMMON> $56,000
<OTHER-SE> $7,742,000
<TOTAL-LIABILITY-AND-EQUITY> $9,979,000
<SALES> $3,659,000
<TOTAL-REVENUES> $3,659,000
<CGS> $1,940,000
<TOTAL-COSTS> $1,360,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $13,000
<INCOME-PRETAX> $299,000
<INCOME-TAX> $41,000
<INCOME-CONTINUING> $258,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $258,000
<EPS-PRIMARY> .005
<EPS-DILUTED> .005
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