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 April 30, 1998
--------------
[ ] 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.
- -------------------------------------------------------------------------
(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)
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(212) 397-7788
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(Issuer's telephone number)
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: 1,117,519 shares of
Common Stock outstanding as of June 10, 1998.
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PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, 1998 and July 31, 1997
ASSETS
30-Apr-98 31-Jul-97
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 693,000 $ 901,000
Marketable securities 695,000 576,000
Trade accounts receivable, net 2,413,000 1,838,000
Related party receivable 26,000 30,000
Deferred income taxes 186,000 238,000
Inventories 2,253,000 1,888,000
Other current assets 440,000 142,000
---------- ----------
Total current assets 6,706,000 5,613,000
PROPERTY HELD FOR LEASE, NET 2,191,000 2,566,000
PROPERTY AND EQUIPMENT, NET 955,000 876,000
DEFERRED INCOME TAXES 529,000 542,000
----------- ----------
$10,381,000 $9,597,000
=========== ==========
The accompanying notes are an integral part of these statements.
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, 1998 and July 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
30-Apr-98 31-Jul-97
--------- ---------
CURRENT LIABILITIES
Notes payable to banks $ 300,000 $ 153,000
Trade accounts payable 649,000 473,000
Income taxes payable 164,000 101,000
Accrued liabilities 712,000 1,157,000
Note payable to shareholder 20,000 50,000
Current maturities of long-term obligation 24,000 22,000
---------- ----------
Total current liabilities $1,869,000 $1,956,000
LONG-TERM OBLIGATION, less current maturities 89,000 101,000
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY (1)
Convertible preferred stock, par value $0.01;
authorized 100,000 shares
Series A; issued and outstanding 5,200 shares - -
Series E; issued and outstanding 21,231 shares - -
Common stock, par value $0.001; authorized
1,650,000 shares; issued and outstanding,
1,117,519 shares issued at April 30 and
1,111,390 at July 31 56,000 56,000
Additional paid-in capital 10,997,000 10,987,000
Common stock subscriptions receivable from
related parties - (15,000)
Treasury stock, at cost (22,560 common shares) (157,000) (157,000)
Accumulated deficit (2,473,000) (3,331,000)
------------ -----------
Total shareholders' equity 8,423,000 7,540,000
------------ -----------
$10,381,000 $9,597,000
============ ===========
The accompanying notes are an integral part of these statements.
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
For the three months and nine months ended April 30,
(Three months ended) (Nine months ended)
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net Revenues $ 3,852,000 $ 3,228,000 $11,377,000 $ 8,857,000
Cost and expenses:
Cost of products
sold 2,170,000 1,674,000 6,131,000 4,547,000
Selling, general
and administrative 1,441,000 1,274,000 3,992,000 3,280,000
Research and
development 113,000 116,000 289,000 308,000
Interest expense 9,000 10,000 37,000 33,000
----------- ----------- ----------- -----------
$ 3,733,000 $ 3,074,000 $10,449,000 $ 8,168,000
----------- ----------- ----------- -----------
Earnings before
income taxes and
extra ordinary item 119,000 154,000 982,000 689,000
Income tax expense ( 2,000) ( 8,000) 104,000 86,000
Earnings before
extraordinary item 121,000 162,000 824,000 603,000
Extraordinary Item - - 33,000 -
Forgiveness of Debt,
net of tax effect
---------- ----------- ----------- -----------
NET EARNINGS $ 121,000 $ 162,000 $ 857,000 $ 603,000
=========== =========== =========== ===========
Net earnings per
common and common
equivalent share 0.11 0.15 0.77 0.53
=========== =========== =========== ===========
Weighted average
number of shares
outstanding 1,117,519 1,181,556 1,117,519 1,181,556
The accompanying notes are an integral part of these statements.
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended April 30,
1998 1997
---------- ----------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net Earnings $857,000 $603,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 162,000 263,000
Amortization of leasehold interest 374,000 364,000
Changes in assets and liabilities:
Accounts receivable (571,000) (18,000)
Inventories (365,000) (665,000)
Deferred Tax 65,000 -
Other current assets (298,000) (8,000)
Accounts payable 176,000 326,000
Accrued liabilities (445,000) (1,206,000)
Income taxes payable 63,000 -
----------- -----------
Total Adjustments (839,000) (936,000)
----------- -----------
Net cash provided by
operating activities 18,000 (333,000)
Cash flows from investing activities
Purchase of property and equipment (239,000) (504,000)
Purchase of marketable securities (481,000) -
Proceeds from maturities of marketable
securities 362,000 -
----------- -----------
Net cash used in investing
activities (358,000) (504,000)
Cash flows from financing activities
Principal payments on long-term obligations (10,000) (220,000)
Principal payments on note payable to shareholder (30,000) -
Cash received from issuance of long-term debt - 130,000
Net change in line of credit 147,000 118,000
Net change in stock subscriptions 15,000 -
Cash received from issuance of common stock 10,000 4,000
----------- -----------
Net cash provided by financing
activities 132,000 32,000
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Net decrease in cash and cash
equivalents (208,000) (805,000)
Cash and cash equivalents at beginning of quarter 901,000 2,025,000
----------- -----------
Cash and cash equivalents at end of quarter $ 693,000 $1,220,000
=========== ===========
Supplemental disclosures of cash flow information
- -------------------------------------------------
Cash paid during the quarter for
Interest $ 10,000
Income Taxes -
The accompanying notes are an integral part of these statements.
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Notes to Financial Statements
(unaudited)
Note 1
- ------
Effective February 26, 1998, the shareholders of the
Company approved an amendment to the Company's Certificate of
Incorporation reducing the number of authorized shares of the Company to
1,650,000 shares of Common Stock, par value $0.001 per share, and 100,000
shares of preferred stock, par value $0.01 per share.
Note 2
- ------
The consolidated financial statements have been prepared by
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
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Results of Operations:
- ----------------------
Total revenues for the nine months ended April 30, 1998 were
$11,377,000 versus $8,857,000 for the same period last year, a 28%
increase. Total revenues for the three months ended April 30, 1998 were
$3,852,000 versus $3,228,000 for the same period last year, a 19%
increase.
Revenues for the Company's subsidiary, Hart Scientific, Inc., for
the current nine month period were $11,298,000 versus $8,503,000 for the
same period last year, a 33% increase. (Figures given for Hart
Scientific include Hart Scientific's subsidiary, Calorimetry Sciences
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Corporation). Hart Scientific revenues for the current three month
period were $3,843,000 versus $3,106,000 for the same period last year, a
24% increase.
General and administrative expenses for the current nine month period
were $2,867,000 versus $2,299,000 for the same period last year. The
expenses for the current period included depreciation by the Company's
subsidiary, Lifschultz Fast Freight, of its New York leasehold $374,000
in the current nine month period).
Marketing and sales expenses for the current three month period
were $455,000 and $1,113,000 for the current nine month period. For the
current nine months ended April 30, 1998, marketing and sales expenses
were 10% of Hart revenues, versus 12% of the same period last year.
Consolidated net income before extraordinary items for the nine
months ended April 30, 1998 was $824,000 versus $603,000 for the same
period last year, a 37% increase. Net income for the current nine month
period at Hart Scientific was $1,115,000 versus $584,000 for the same
period last fiscal year, a 91% increase.
Consolidated net income for the current three month period was
$121,000 compared to $162,000 during the same three month period last
year, a 25% decrease. Net income for the current three month period at
Hart Scientific was $263,000 versus $215,000 for the same period last
fiscal year, a 22% increase.
Administrative costs at Lifschultz Fast Freight and Lifschultz
Industries reduced operating profits during the current quarter.
Financial Condition and Liquidity
- ---------------------------------
The company's current ratio at April 30, 1998 is 3.59 versus 2.87 at
July 31, 1997. The current ratio has improved from .49 on July 31, 1993
to 3.59 on April 30, 1998.
The Company will need capital to support the growth of Hart
Scientific. 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 has approximately $475,000 in unused lines of credit
available.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
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4.08 Certificate of Amendment to Certificate
of Incorporation
4.09 Certificate of Elimination for Certificates of Designation
4.10 Certificate of Decrease for Certificates of Designation
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-----------------------
No reports on From 8-K were filed by the Company during the quarter
ended April 30, 1998.
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 June 12, 1998 By: DENNIS R. HUNTER
---------------- ----------------------
Dennis R. Hunter
President and Chief
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> APR-30-1998
<CASH> $ 693,000
<SECURITIES> 695,000
<RECEIVABLES> 2,439,000
<ALLOWANCES> 0
<INVENTORY> 2,253,000
<CURRENT-ASSETS> 6,706,000
<PP&E> 3,146,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,381,000
<CURRENT-LIABILITIES> 1,869,000
<BONDS> 0
0
0
<COMMON> 56,000
<OTHER-SE> 8,367,000
<TOTAL-LIABILITY-AND-EQUITY> 10,381,000
<SALES> 3,852,000
<TOTAL-REVENUES> 3,852,000
<CGS> 2,170,000
<TOTAL-COSTS> 2,170,000
<OTHER-EXPENSES> 1,554,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,000
<INCOME-PRETAX> 119,000
<INCOME-TAX> (2,000)
<INCOME-CONTINUING> 121,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,000
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
Exhibit 4.08
LIFSCHULTZ INDUSTRIES, INC.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
LIFSCHULTZ INDUSTRIES, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
The amendment to the Corporation's Certificate of Incorporation
set forth below amending Article IV was approved and adopted by the
Corporation's Board of Directors at a duly held meeting of the Board
on February 25, 1998, and subsequently approved and adopted by the
Corporation's shareholders by written consent in lieu of a meeting,
all in accordance with the provisions of Sections 242 and 228 of the
General Corporation Law of the State of Delaware (including the giving
of written notice of such consent to the Corporation's shareholders
not consenting in writing):
Article IV of the Corporation's Certificate of Incorporation
shall be amended to read in its entirety:
ARTICLE IV
CAPITALIZATION
--------------
The total number of shares of all classes of capital stock
which this Corporation shall have authority to issue is ONE
MILLION SEVEN HUNDRED FIFTY THOUSAND (1,750,000) shares of par
value stock; ONE HUNDRED THOUSAND (100,000) shares of $0.01 (One
Cent) par value per share to be preferred shares and ONE MILLION
SIX HUNDRED FIFTY THOUSAND (1,650,000) shares of $0.001 (One
Tenth Cent) par value per share to be common shares. All or any
part of the shares of the preferred or common stock may be issued
by the Corporation from time to time and for such consideration
as may be determined and fixed by the Board of Directors, as
provided by law, with due regard to the interest of the existing
shareholders; and when such consideration has been received by
the Corporation, such shares shall be deemed fully paid and
non-assessable.
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The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide
for the issuance of the shares of preferred stock in series, and
by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of
shares to be included in each such series, and to fix the
designations, powers, preferences and rights of the shares of
each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board with respect to each such series shall
include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and
the distinctive designation of that series;
(b) The dividend rate, if any, on the shares of that
series, whether dividends shall be cumulative, and, if so, from
which date or dates, and the relative rights of priority, if any,
of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the
terms of such voting rights;
(d) Whether that series shall have conversion
privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion
rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(f) Whether that series shall have a sinking fund for
the redemption or purchase of shares of that series, and, if so,
the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, and the relative rights of priority, if
any, of payment of shares of that series;
(h) Any other relative rights, preferences, and
limitations of that series.
The Certificates of Designation filed by the Corporation
with the Delaware Secretary of State on January 17, 1991, for
Series A Convertible Preferred Stock and on March 31, 1994, for
Series E Convertible Preferred Stock, as amended by a Certificate
of Decrease and Elimination filed February 26, 1998, shall
continue to be valid designations by the Corporation's Board of
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Directors of its preferred stock pursuant to the provisions of
this Article IV.
Effective as of 5:00 p.m., Delaware time, January
27, 1998 (the "Effective Date"), each one share of the Company's
Common Stock issued and outstanding on the Effective Date 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.
IN WITNESS WHEREOF, LIFSCHULTZ INDUSTRIES, INC. has caused this
Certificate to be signed by David K. Lifschultz, its Chief Executive
Officer, this 26th day of February, 1998.
LIFSCHULTZ INDUSTRIES, INC.
By: DAVID K. LIFSCHULTZ
-------------------
David K. Lifschultz, CEO
Exhibit 4.09
LIFSCHULTZ INDUSTRIES, INC.
CERTIFICATE OF ELIMINATION FOR
CERTIFICATES OF DESIGNATION
FOR
SERIES B CONVERTIBLE PREFERRED STOCK
SERIES C 10% CUMULATIVE NON-VOTING PREFERRED STOCK
SERIES D 8% CUMULATIVE NON-VOTING PREFERRED STOCK
LIFSCHULTZ INDUSTRIES, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation (as amended), and
pursuant to the provisions of Section 151(g) of Title 8 of the Delaware
Code, the Board of Directors adopted the following resolution effective
as of February 25, 1998, for the purpose of eliminating from the
Corporation's Certificate of Incorporation all matters set forth with
respect to Series B Convertible Preferred Stock, Series C 10% Cumulative
Non-Voting Preferred Stock, and Series D 8% Cumulative Non-Voting
Preferred Stock:
RESOLVED, that no shares of Series B Convertible Preferred Stock
(designated November 12, 1991), Series C 10% Cumulative Non-Voting
Preferred Stock (designated January 17, 1991), and Series D 8% Cumulative
Non-Voting Preferred Stock (designated January 17, 1991) are currently
outstanding and that no such shares shall be issued by the Corporation
subject to the certificate of designations previously filed by the
Corporation with respect to such Preferred Stock.
IN WITNESS WHEREOF, SAID LIFSCHULTZ INDUSTRIES, INC. has caused this
Certificate to be signed by its Chief Executive Officer, this 25th day of
February 1998.
LIFSCHULTZ INDUSTRIES, INC.
By: DAVID K. LIFSCHULTZ
-------------------
David K. Lifschultz, CEO
Exhibit 4.10
LIFSCHULTZ INDUSTRIES, INC.
CERTIFICATE OF DECREASE FOR
CERTIFICATES OF DESIGNATION
FOR
SERIES A CONVERTIBLE PREFERRED STOCK
SERIES E CONVERTIBLE PREFERRED STOCK
LIFSCHULTZ INDUSTRIES, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation (as amended), and pursuant to
the provisions of Section 151(g) of Title 8 of the Delaware Code, the Board of
Directors, by resolution duly adopted and effective as of February 25, 1998,
authorized the following decrease in the number of shares of Series A
Convertible Preferred Stock and Series E Convertible Preferred Stock, without
altering any other designations, preferences and rights of such stock:
1. The number of shares designated as Series A Convertible Preferred
Stock, par value $0.01 per share, previously designated on January 17, 1991,
shall be decreased to 5,200 shares.
2. The number of shares designated as Series E Convertible Preferred
Stock, par value $0.01 per share, previously designated on March 31, 1994 and
increased on April 24, 1995, shall be decreased to 21,231 shares.
IN WITNESS WHEREOF, SAID LIFSCHULTZ INDUSTRIES, INC. has caused this
Certificate to be signed by its Chief Executive Officer, this 25th day of
February 1998.
LIFSCHULTZ INDUSTRIES, INC.
By:DAVID K. LIFSCHULTZ
---------------------------
David K. Lifschultz, CEO
