SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
(Amendment No. -----)
Check the appropriate box:
X/ Preliminary Information Statement
/ Confidential, for Use of the Commission Only (as permitted by Rule 14c
5(d)(2)
/ Definitive Information Statement
LIFSCHULTZ INDUSTRIES, INC.
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
/ Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction.
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5) Total fee paid:
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/ Fee paid previously with preliminary materials.
/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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INFORMATION STATEMENT
December 19, 1997
To The Shareholders of
Lifschultz Industries, Inc.
This Information Statement (the "Information Statement") is being
delivered by Lifschultz Industries, Inc., a Delaware corporation (the
"Company"), and relates to the approval by the shareholders of the Company
of an amendment to the Company's Certificate of Incorporation that will make
effective a "1 for 50" reverse stock split of the Company's common stock,
par value $0.001 ("Common Stock"). The purpose of the Reverse Split is to
raise the average bid price of the Company's Common Stock above $1.00 per
share in order to maintain the Common Stock's current listing on The Nasdaq
SmallCap Market.
On December 15, 1997, by unanimous written consent, the Board of
Directors of the Company approved the "1 for 50" reverse stock split (the
"Reverse Split"). At that time, the Board of Directors also approved and
recommended to the Company's shareholders for their approval the amendment
to the Company's Certificate of Incorporation necessary to effectuate the
Reverse Split (the "Amendment"), with such Amendment to become effective
January 23, 1998. Subsequently, by written consent in lieu of a meeting, the
Amendment was approved by the shareholders of the Company holding a majority
of the voting shares of stock in the Company.
This Information Statement will be mailed on or about December 30,
1997. It is being furnished to shareholders solely to provide them with
certain information concerning the Reverse Split and the Amendment in
accordance with the requirements of the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder, particularly Regulation
14C. The costs of this Information Statement are being borne by the
Company.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
Amendment of Certificate of Incorporation
The Board of Directors and the shareholders of the Company have adopted
a resolution approving an amendment to the Company's Certificate of
Incorporation to effect a reverse split of the Company's Common Stock,
pursuant to which each 50 shares of Common Stock will be automatically
converted into one share of Common Stock without any action on the part of
the shareholder. The text of the Amendment is set forth in Exhibit A to
this Information Statement.
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Consummation of the Reverse Split will not change the number of shares
of Common Stock authorized by the Company's Certificate of Incorporation,
which will remain at 80,000,000 shares, or the $0.001 par value per share
of Common Stock. Under the terms of the Certificate of Amendment that the
Company will shortly file with the Delaware Secretary of State, the Reverse
Split will become effective as of 5:00 p.m., Delaware time, January 23, 1998
(the "Effective Date"). If for any reason the Board of Directors deems it
advisable, the Reverse Split and Amendment may be abandoned or postponed at
any time before the Effective Date.
No scrip or fractional certificates will be issued in connection with
the Reverse Split. Shareholders who hold a total number of shares of Common
Stock not evenly divisible by fifty will be entitled, upon surrender to the
exchange agent of all certificates representing such shares, to receive one
additional share of Common Stock for any fractional share to which they
would otherwise be entitled based on the aggregate number of shares held by
such shareholder. Under such treatment, it is estimated that the Company
may issue approximately 400 additional shares, resulting in only negligible
dilution of shareholders not receiving such additional shares. Shareholders
are encouraged to surrender their certificates to the exchange agent for
certificates evidencing whole shares of the Common Stock due them.
Exchange of Certificates
If you are a record holder of shares of Common Stock, included with
this Information Statement is a transmittal letter with instructions for the
surrender of your certificate(s) to the Company's designated exchange agent.
When a shareholder's current certificates and completed transmittal letter
are delivered to the exchange agent, the current certificates will be
exchanged for a new certificate representing the number of whole shares of
Common Stock into which the shares of Common Stock have been converted as
a result of the Reverse Split. No new certificate will be issued to a
shareholder until the shareholder has surrendered outstanding certificates
together with the letter of transmittal to the Company's exchange agent.
A shareholder will not be required to pay a transfer or other fee in
connection with the exchange of certificates if the certificates are
delivered to the exchange agent on or before February 23, 1998, and only one
new certificate is issued aggregating all shares of the shareholder. For
all other new certificates (those received after February 23 and for
shareholders requesting more than one new certificate), a shareholder must
pay a $15.00 fee per new certificate at the time of exchange.
Purpose of the Reverse Split
The purpose of the Reverse Split is to raise the average bid price of
the Company's Common Stock above $1.00 per share in order to maintain the
Common Stock's current listing on The Nasdaq SmallCap Market ("Nasdaq SCM").
In order to maintain the Common Stock's listing on the Nasdaq SCM, the
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Company historically has had to meet a number of continued listing
requirements. Under more stringent continued listing requirements recently
adopted by The Nasdaq Stock Market, the Company's Common Stock must meet or
exceed a minimum $1.00 bid price, as well as certain other standards, by
February 23, 1998, or be subject to delisting. For a number of years,
however, the Company's Common Stock has had a bid price well below $1.00.
During the twelve-month period ended December 17, 1997, the bid price has
been no higher than $0.21 and as low as $0.06. The Company believes that
after the Reverse Split the Company's shares of Common Stock will have a
minimum bid price in excess of $1.00 per share, satisfying the Nasdaq SCM
continued listing requirement.
The delisting of the Company's Common Stock from the Nasdaq SCM could
adversely affect the liquidity of the Company's Common Stock and the ability
of the Company to raise capital in the future. Following such delisting,
the shares of Common Stock would likely be quoted in the "pink sheets"
maintained by the National Quotation Bureau, Inc. or the NASD Electronic
Bulletin Board and the spread between the bid and ask price of the shares
of Common Stock would likely be greater than at present and shareholders
might experience a greater degree of difficulty in engaging in trades of
shares of Common Stock. Thus, the Company believes that it is in the best
interest of the shareholders that the Company seek to maintain the Nasdaq
SCM listing for its Common Stock.
Shareholders should note, however, that the effect of the Reverse Split
upon the market prices for the Company's Common Stock cannot be accurately
predicted. In particular, there is no assurance that prices for shares of
the Common Stock after the Reverse Split will be fifty times the prices for
shares of the Common Stock immediately prior to the Reverse Split.
Furthermore, there can be no assurance that the Reverse Split will not
adversely impact the market price of the Common Stock or, alternatively,
that any increased price per share of the Common Stock immediately after the
proposed Reverse Split will be sustained for any prolonged period of time.
In addition, the Reverse Split may have the effect of creating odd lots of
stock for some shareholders and such odd lots may be more difficult to sell
or have higher brokerage commissions associated with the sale of such odd
lots.
Additionally, the Company will also need to satisfy other continued
listing requirements. These other requirements consist of maintaining: (i)
net tangible assets of $2,000,000, market capitalization of $35,000,000, or
net income of $500,000 (in latest fiscal year or 2 of the 3 last fiscal
years); (ii) a public float of at least 500,000 shares; (iii) a market value
of the public float of at least $1,000,000; (iv) at least 300 shareholders
(round lot holders); (v) at least two market makers; and (vi) compliance
with certain corporate governance requirements. The Company believes that
on the Effective Date of the Reverse Split it will satisfy all of these
other maintenance criteria. There can be no assurance, however, that the
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Company will be able to continue to meet all continued listing requirements
in the future.
Principal Effects of the Reverse Split
Based upon the 55,569,495 shares of Common Stock outstanding on
November 29, 1997, the Reverse Split would decrease the outstanding shares
of Common Stock by 98%, leaving approximately 1,111,400 shares of Common
Stock outstanding. The Company is authorized to issue up to 85,000,000
shares of capital stock, of which 80,000,000 shares are Common Stock and
5,000,000 shares are Preferred Stock. The Reverse Split will not affect the
number of authorized shares of Preferred Stock or Common Stock, or the par
value of the Preferred Stock or Common Stock.
Except for the negligible adjustments resulting from the elimination
of fractional shares, consummation of the Reverse Split will not result in
a change in the relative equity position or voting power of the holders of
Common Stock or Preferred Stock. The rights and privileges of the holders
of shares of Common Stock will be unaffected by the Reverse Split. The par
value of the Common Stock will remain at $.001 per share following the
Effective Date of the Reverse Split, and the number of shares of Common
Stock issued will be reduced.
None of the shares of Preferred Stock will be split. However, under
the current terms of the Preferred Stock, the conversion amounts and voting
rights of each class of Preferred Stock will be proportionately adjusted as
a result of the Reverse Split. The conversion of such Preferred Stock into
Common Stock after the Reverse Split could result in fractional shares of
Common Stock. The Company, however, will not issue a fraction of one share
of Common Stock. Instead, the holder converting Preferred Stock to Common
Stock will be entitled, upon surrender to the exchange agent of certificates
for conversion, to receive one additional share of Common Stock for any
fractional share to which they would otherwise be entitled. All other
rights and privileges of the holders of the Preferred Stock will be
unaffected by the Reverse Split.
Because the Reverse Split will reduce the number of shares of Common
Stock outstanding, it will indirectly result in an increase in the number
of authorized shares that the Company could issue in the future. As of
November 29, 1997, there were approximately 18,400,000 authorized and
unreserved shares of Common Stock available for issuance by the Company.
Following the Reverse Split, the Company will have available roughly
78,800,000 shares available for issuance. Such increase in available
authorized shares could be construed as having an anti-takeover effect,
although neither the Board of Directors nor the management of the Company
views the Reverse Split in that perspective. The increase in available
share could increase the Company's ability to use the available shares to
frustrate persons seeking to effect a takeover or otherwise gain control of
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the Company by, for example, privately placing shares with purchasers who
might side with the Board of Directors in opposing a hostile takeover bid.
Shares of Common Stock could also be issued to a holder that would
thereafter have sufficient voting power to assure that any proposal to amend
or repeal the By Laws or certain provisions of the Certificate of
Incorporation would not receive the requisite vote. Such uses of the Common
Stock could render more difficult, or discourage, an attempt to acquire
control of the Company, if such transaction were opposed by the Board of
Directors. Further, the shares could be issued by the Company without
further shareholder approval, which could result in further dilution to the
holders of Common Stock.
No officer, director, associate, or affiliate of the Company will
derive any material benefit from the Reverse Split other than the benefits
which would be enjoyed by any other person holding the same number of
shares. Under Delaware law, shareholders are not entitled to dissenter's
rights in conjunction with the Reverse Split.
Federal Income Tax Consequences of the Reverse Split
The following is a summary of the material anticipated federal income
tax consequences of the Reverse Split to holders of the Common Stock. This
summary is based on the federal income tax laws now in effect and as
currently interpreted; it does not take into account possible changes in
such laws or interpretations, including amendments to applicable statutes,
regulations, and proposed regulations or changes in judicial or
administrative rulings, some of which may have retroactive effect. This
summary is provided for general information only and does not purport to
address all aspects of the possible federal income tax consequences of the
Reverse Split and IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. In
particular, and without limiting the foregoing, this summary does not
consider the federal income tax consequences to shareholders of the Company
in light of their individual investment circumstances or to holders subject
to special treatment under the federal income tax laws (for example, life
insurance companies, regulated investment companies, and foreign taxpayers).
The summary does not address any consequence of the Reverse Split under any
state, local, or foreign tax laws. No ruling from the Internal Revenue
Service or opinion of counsel will be obtained regarding the federal income
tax consequences to the shareholders of the Company as a result of the
Reverse Split. ACCORDINGLY, EACH SHAREHOLDER IS ENCOURAGED TO CONSULT HIS
OR HER TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED
TRANSACTION TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX LAWS.
The Company believes that the Reverse Split would be a tax-free
recapitalization to the Company and its shareholders. If the Reverse Split
qualifies as a recapitalization under the Internal Revenue Code of 1986, as
amended, a shareholder of the Company who exchanges their current
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certificates ("Old Certificates") solely for new certificates received from
the Company as a result of the Reverse Split ("New Certificates") should
recognize no gain or loss for federal income tax purposes. A shareholder's
aggregate tax basis in his Common Stock represented by the New Certificates
received from the Company as a result of the Reverse Split should be the
same as his aggregate tax basis in the Common Stock represented by the Old
Certificates. The holding period of shares of the Common Stock represented
by the New Certificates received from the Company as a result of the Reverse
Split should include the period during which shares of the Common Stock
surrendered in exchange therefor were held, provided all such shares of
Common Stock were held as a capital asset on the date of the exchange.
Although not free from doubt, the above treatment should also apply
with respect to an additional share received instead of a fractional share.
However, it is possible that the receipt of such additional share could be
wholly or partly taxable. Holders should consult with their own tax
advisors in this regard.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of November 29,
1997 with respect to (i) each person who is known to the Company to
beneficially own more than five percent of the outstanding shares of Common
Stock or a class of Preferred Stock, (ii) the beneficial ownership of such
securities by each executive officer and director of the Company, and (iii)
the beneficial ownership of all such securities by all of the Company's
directors and executive officers as a group. Unless otherwise indicated,
the persons or entities named in the table have sole voting and investment
power with respect to all shares of stock beneficially owned by them,
subject to applicable community property laws. Stock that is "beneficially
owned" includes all the stock that the person has the right to acquire
within 60 days of November 29, 1997. The percentage ownership for any
person is calculated assuming that all the stock that could be acquired by
that person within 60 days by option exercise or otherwise, is in fact
outstanding and that no other stockholder has exercised a similar right to
acquire additional shares.
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT
CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------ ---------------------- ----------------- --------
Common David K. Lifschultz 24,146,554[1] 42.1%
641 West 59th Street
New York, NY 10019
Common Sidney B. Lifschultz 702,006[2] 1.3%
641 West 59th Street
New York, NY 10019
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Common Charlotte K. Lifschultz 10,390,444[3] 18.7%
641 West 59th Street
New York, NY 10019
Common Hudson Waterfront 4,499,522[4] 8.1%
Associates, L.P.
725 Fifth Ave.
New York, NY 10022
Common Merrill E. Brown 2,822,129[5] 5.1%
1444 County Road 502
Bayfield, CO 81122
Common Dennis R. Hunter 1,539,036[6] 2.7%
515 East 1860 South
Provo, UT 84606
Common J. Randall Owen 50,000[7] 0.1%
799 E. Utah Valley Drive
American Fork, UT 84003
Common Michael Hirst 1,360,209[8] 2.4%
799 E. Utah Valley Drive
American Fork, UT 84003
Common James C. Triplett 0[9] 0
779 E. Utah Valley Drive
American Fork, UT 84003
Common James Solomon 0[10] 0
1455 West Center
Orem, UT 84058
Series A John G. Bartol 5,200 100%
Preferred 645 W. Rockford Drive
Tempe, AZ 85281
Series E Reboul, MacMurray, Hewitt 20,679 97.4%
Preferred & Kristol
45 Rockefeller Plaza
New York, NY 10111
Common All directors and executive 27,417,805[1,2,6,7,8,9,10] 49.3%
officers (7 persons) as a Group
[1] Chairman and Chief Executive Officer of the Company. Includes:
(i) 9,729,309 shares held directly; (ii) 1,750,000 shares of common stock
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underlying employee stock options which are currently exercisable; (iii)
10,272,685 shares for which David K. Lifschultz shares voting power as co
trustee with Charlotte K. Lifschultz for the Sidney B. Lifschultz 1992
Family Trust; and (iv) 2,394,560 shares of stock held by Lifschultz Terminal
and Leasing Company for which David K. Lifschultz shares voting power as an
officer and director of Lifschultz Terminal and Leasing Company. Except for
the shares identified in the foregoing item (iii), excludes shares shown as
beneficially owned by Sidney B. Lifschultz (father) and Charlotte K.
Lifschultz (mother).
[2] Director of the Company. Includes: (i) 544,980 shares held
directly; and (ii) 157,026 shares for which Sydney B. Lifschultz holds
shared voting power as co-trustee of certain trusts for family members.
Excludes shares shown as beneficially owned by Charlotte K. Lifschultz
(spouse) and David K. Lifschultz (son).
[3] Beneficial owner of 5% of the class shares indicated. Includes
only shares of stock for which Charlotte K. Lifschultz (wife of Sydney B.
Lifschultz) has shared voting power as a co-trustee with David K. Lifschultz
for the Sydney B. Lifschultz 1992 Family Trust and trusts for the benefit
of family members. Note that 10,272,685 of the shares shown for Charlotte
K. Lifschultz are also reported for David K. Lifschultz as they share voting
power for such shares. Except as stated in the foregoing sentence, excludes
shares shown as beneficially owned by Sidney B. Lifschultz (spouse) and
David K. Lifschultz (son).
[4] Beneficial owner of 5% of the class of shares indicated. Includes
4,499,522 shares held directly.
[5] Beneficial owner of 5% of the class of shares indicated.
Includes: 2,822,129 shares for which Merrill E. Brown holds shared or sole
voting power as trustee of trusts for various family members.
[6] President, Chief Financial Officer, and director of the Company.
Includes only shares underlying employee stock options held by Dennis R.
Hunter which are currently exercisable.
[7] President and Chief Operating Officer of subsidiary Hart
Scientific, Inc. Includes 50,000 shares of common stock held directly.
[8] Vice President and director of subsidiary Hart Scientific, Inc.
Includes: (i) 1,098,317 shares held directly; and (ii) 261,892 shares of
common stock underlying employee stock options which are currently
exercisable. Excludes 10,000 shares held by an immediate family member for
which Michael W. Hirst disclaims beneficial ownership.
[9] Chairman and Chief Executive Officer of subsidiary Hart
Scientific, Inc.
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[10] Director of subsidiary Hart Scientific, Inc.
Voting Rights
The outstanding voting securities of the Company on November 29, 1997,
were (i) 55,569,495 shares of Common Stock; (ii) 5,200 shares of Series A
Convertible Preferred Stock, par value $0.01 per share ("Series A Shares");
and (iii) 21,231 shares of Series E Convertible Preferred Stock, par value
$0.01 per share ("Series E Shares"). Holders of Series A and E Shares are
entitled convert each Series A and E Share into ten shares (one-fifth of one
share after the Reverse Split) of Common Stock (subject to further adjust-
ment for stock splits and similar events), and to vote with the Common Stock
on an as-converted basis.
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EXHIBIT A
AMENDMENT TO CERTIFICATE OF INCORPORATION OF LIFSCHULTZ INDUSTRIES, INC.
Article IV of the Certificate of Incorporation, entitled
"Capitalization" as heretofore added to or amended by certificates filed
pursuant to law, shall be amended to include the following new paragraph:
"Effective as of January 23, 1998 (the "Effective Date"), each one share
of the Company's Common Stock issued and outstanding on the Effective Date
of this Amendment shall be automatically changed without further action into
one-fiftieth of a fully paid and nonassessable share of the Company's Common
Stock, provided that no fractional shares shall be issued pursuant to such
change. The Company shall issue to each shareholder who, based on the
aggregate number of shares held by such shareholder, would otherwise be
entitled to a fractional share as a result of such change, one additional
whole share."
