U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 2000
-----------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from -------------- to --------------
Commission file number 001-10287
LIFSCHULTZ INDUSTRIES, INC.
------------------------------------------------------
(Name of small business issuer in its charter)
DELAWARE 87-0448118
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
641 WEST 59TH STREET, NEW YORK, NY 10019
--------------------------------------------------
(Address of principal executive offices)(Zip Code)
Issuer's telephone number: (212) 397-7788
Securities registered under Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
NONE
Securities registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
1
<PAGE>
Check whether the issuer (1) has 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
------- -------
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $19,334,000
The aggregate market value of the voting and non-voting common equity of
the issuer held by non-affiliates, based upon the closing price of the Common
Stock on October 25, 2000 as reported on The Nasdaq SmallCap Market, was
approximately $11,239,000 (Assumes: (i) full conversion of all Preferred Stock
into Common Stock and (ii) affiliates include only executive officers, directors
and shareholders known to the issuer to beneficially own 10% or more of the
Company's Common Stock.)
The number of shares of the issuer's common equity outstanding as of
October 24, 2000 was: 1,121,655 shares of Common Stock, 5,200 shares of Series A
Convertible Preferred Stock (convertible into 1,040 shares of common stock), and
552 shares of Series E Convertible Preferred Stock (convertible into 111 shares
of common stock).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the issuer's Annual Report to Shareholders for fiscal year
ended July 31, 2000, are incorporated into Parts I and II of this Form 10-KSB.
Portions of the registrant's Proxy Statement provided to shareholders in
conjunction with its 2000 Annual Meeting of Shareholders to be held December 14,
2000, are incorporated into Part III of this Form 10-KSB.
Transitional Small Business Disclosure Format (check one):
YES NO X
------ -------
2
<PAGE>
PART I
TO THE EXTENT IDENTIFIED BELOW, THE INFORMATION CALLED FOR IN PART I IS
INCORPORATED BY REFERENCE FROM THE REGISTRANT'S 2000 ANNUAL REPORT TO
SHAREHOLDERS.
Item 1. Description of Business; see 2000 Annual Report section entitled
"Description of Business" and the following section entitled
"CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS".
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS (Cautionary Statements
Under the Private Securities Litigation Reform Act of 1995)
The disclosure and analysis set forth herein and in the 2000 Annual Report
to Shareholders of Lifschultz Industries, Inc. (the "Company") contain certain
forward-looking statements, particularly statements relating to future actions,
performance or results of current and anticipated products, sales efforts,
expenditures, and financial results. From time to time, the Company also
provides forward-looking statements in other publicly-released materials, both
written and oral. Forward-looking statements provide current expectations or
forecasts of future events such as new products, product approvals, revenues,
and financial performance. These statements are identified as any statement that
does not relate strictly to historical or current facts. They use words such as
"plans", "expects", "will", and other words and phrases of similar meaning. In
all cases, a broad variety of risks and uncertainties, both known and unknown,
as well as inaccurate assumptions, can affect the realization of the
expectations or forecasts in those statements. Consequently, no forward-looking
statement can be guaranteed. Actual future results may vary materially.
The Company undertakes no obligation to update any forward- looking
statements, but investors are advised to consult any further disclosures by the
Company on this subject in its subsequent filings pursuant to the Securities
Exchange Act of 1934. Furthermore, as permitted by the Private Securities
Litigation Reform Act of 1995, the Company provides these cautionary statements
identifying factors that could cause the Company's actual results to differ
materially from expected and historical results. It is not possible to foresee
or identify all such factors. Consequently, this list should not be considered
an exhaustive statement of all potential risks, uncertainties and inaccurate
assumptions.
Competitive Environment
The temperature calibration instrument industry is highly competitive and
subject to significant technological change. Participation in the industry
requires ongoing investment to keep pace with technological developments and
3
<PAGE>
quality. The industry consists of numerous companies, ranging from start-up to
well-established companies. The competitors and potential competitors of the
Company may succeed in developing or marketing technologies and products that
will be preferred in the marketplace over the devices manufactured by the
Company or that would render its technology and products obsolete or
noncompetitive.
Uncertain Market Acceptance of Products
There can be no assurance that the new products created by the Company will
gain any significant market acceptance and market share among its current or
potential customers. Market acceptance depends on a variety of factors,
including educating customers on the benefits of new products. Market acceptance
and market share are also affected by the timing of market introduction of
competitive products. Accordingly, the relative speed with which the Company can
develop products and supply the product to the market are expected to be
important factors in market acceptance and market share. The Company may be
unable to continue effective sales and marketing. The failure by the Company to
gain market acceptance of its products could have a material adverse effect on
the Company.
Product Obsolescence
Technological innovation characterizes the marketplace for temperature
calibration equipment. As a result, the Company is subject to the risk of
product obsolescence, whether from prolonged development or the development of
improved products or processes by competitors. Any development adversely
affecting the market for a product manufactured by the Company could have a
material adverse effect on the Company.
Product Development
The success of the Company will depend to a significant extent upon its
ability to enhance and expand on its current offering of proprietary products
and to develop and introduce additional innovative products that gain market
acceptance. While the Company maintains research and development programs, there
is no assurance that the Company will be successful in selecting, developing,
manufacturing, and marketing new products or enhancing its existing products on
a timely or cost-effective basis. Moreover, the Company may encounter technical
problems in connection with its efforts to develop or introduce new products or
product enhancements. Some of the products currently under consideration by the
Company will require significant additional development and related investment
prior to their commercialization. There can be no assurance that such products
will be successfully developed, be capable of being produced in commercial
quantities at reasonable costs, or be successfully marketed. The failure of the
Company to develop or introduce new products or product enhancements that
4
<PAGE>
achieve market acceptance on a timely basis could have a material adverse effect
on the Company.
Design and Manufacturing Process Risks
While the Company has substantial experience in designing and manufacturing
products, the Company may still experience technical difficulties and delays
with the design and manufacturing of its products. Such difficulties could cause
significant delays in the Company's production of products and have a material
adverse effect on the Company's revenues. Potential difficulties in the design
and manufacturing process that could be experienced by the Company include
difficulty in meeting required specifications and difficulty in achieving
necessary manufacturing efficiencies.
Expansion of Marketing; Limited Distribution
The Company currently has a limited domestic direct sales force,
complemented by a number of independent distributors. The Company anticipates
that it will need to increase its marketing and sales capability to more fully
cover its target niche markets, particularly as new products become commercially
available. There can be no assurance that the Company will be able to compete
effectively in attracting and retaining qualified sales personnel or
distributors as needed. There can be no assurance that the Company will be
successful in marketing or selling the Company's services and products.
Dependence Upon Management
The Company is substantially dependent upon its key managerial, technical,
and engineering personnel. The Company must also attract and retain highly
qualified engineering and technical personnel. Competition for such personnel is
intense, the available pool of qualified candidates is limited, and there can be
no assurance that the Company can attract and retain such personnel. The loss of
its key personnel could have a material adverse effect on the Company's
business, results of operations, and financial condition.
Suppliers and Shortages of Component Parts
The Company relies on third-party suppliers for each of the component parts
used in manufacturing its customers' devices. Although component parts are
generally available from multiple suppliers, certain component parts may require
long lead times, and the Company may have to delay the manufacture of products
from time to time due to the unavailability of certain component parts. In
addition, even if component parts are available from an alternative supplier,
the Company could experience additional delays in obtaining component parts if
the supplier has not met the Company's vendor qualifications. Component
shortages for a particular device may adversely affect the Company's ability to
satisfy customer orders for that device and increased prices of such components
can negatively affect the Company's financial results.
5
<PAGE>
Reliance on Efficiency of Distribution and Third Parties
The Company believes its financial performance is dependent in part on its
ability to provide prompt delivery of products to its customers. Accordingly,
delays in distribution in its day-to-day operations or material increases in its
costs of procuring and delivering products could have an adverse effect on the
Company's results of operations. Any failure of either its computer operating
system or its telephone system could adversely affect its ability to receive and
process customer orders and ship products on a timely basis. Strikes or other
service interruptions affecting Federal Express Corporation, United Parcel
Service of America, Inc., the United States Post Office or other common carriers
used by the Company to receive necessary components or other materials or to
ship its products also could impair the Company's ability to deliver products on
a timely and cost-effective basis.
Volatility of Revenues and Product Mix
The Company's annual and quarterly operating results are affected by a
number of factors, including the volume and timing of customer orders. Technical
difficulties and delays in the design and manufacturing processes may also
affect such results. The foregoing factors may cause fluctuations in revenues
and variations in product mix, which could in turn cause fluctuations in the
Company's gross margin.
Limited Market for Common Stock
Historically, the market for the Company's Common Stock has been limited
due to the relatively low trading volume and the small number of brokerage firms
acting as market makers. No assurance can be given that the market for the
Common Stock will continue or increase, or that the prices in such market will
be maintained at their present levels.
Possible Volatility of Stock Price
Announcements of technological innovations for new products by the Company
or its competitors, or developments concerning the Company's proprietary rights
may have a material adverse impact on the Company's business and on the market
price of its Common Stock. The market price of the Company's Common Stock may be
volatile and may fluctuate based on a number of factors, including significant
announcements by the Company and its competitors, quarterly fluctuations in the
Company's operating results, and general economic conditions. In addition, in
recent years the stock market has experienced extreme price and volume
fluctuations, which have had a substantial effect on the market prices for many
companies and are often unrelated to the operating performance of such
companies.
6
<PAGE>
Foreign Exchange, Currency, and Political Risk
The Company's international business is subject to risks customarily
encountered in foreign operations, including changes in a specific country's or
region's political or economic conditions, trade protection measures, import or
export licensing requirements, unexpected changes in regulatory requirements,
and natural disasters. The Company's foreign sales, particularly into Far
Eastern markets, could be adversely affected by an appreciation of the U.S.
dollar relative to other currencies, which in turn could have an adverse
material effect on the Company's consolidated financial position, results of
operations, and the amount and timing of cash flows.
Item 2. Description of Property; see 2000 Annual Report sections entitled
"Hart Scientific, Inc. - Manufacturing and Operations", "Lifschultz
Fast Freight, Inc.", and "Office Space".
Item 3. Legal Proceedings
Neither the Company nor any of its subsidiaries is a party to (or has
property which is the subject of) any material pending legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
TO THE EXTENT IDENTIFIED BELOW, THE INFORMATION CALLED FOR IN PART II IS
INCORPORATED BY REFERENCE FROM THE REGISTRANT'S 2000 ANNUAL REPORT TO
SHAREHOLDERS.
Item 5. Market for Common Equity and Related Stockholder Matters; see 2000
Annual Report section entitled "Market for Company's Common Stock
and Related Stockholder Matters".
Item 6. Management's Discussion and Analysis or Plan of Operation; see 2000
Annual Report section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
Item 7. Financial Statements; see attachment to 2000 Annual Report filed as
an Exhibit hereto.
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not applicable.
7
<PAGE>
PART III
TO THE EXTENT IDENTIFIED BELOW, CERTAIN INFORMATION CALLED FOR IN PART III IS
INCORPORATED BY REFERENCE FROM THE REGISTRANT'S PROXY STATEMENT, TO BE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE REGISTRANT'S
2000 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 14, 2000.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act; see Proxy
Statement sections entitled "Directors and Executive Officers of the
Company", "Significant Employees", and "Section 16(a) Beneficial
Ownership Reporting Compliance".
Item 10. Executive Compensation; see Proxy Statement sections entitled
"Executive Compensation", "Director Compensation", and "Employment
Agreements".
Item 11. Security Ownership of Certain Beneficial Owners and Management; see
Proxy Statement sections entitled "Security Ownership of Certain
Beneficial Owners and Management".
Item 12. Certain Relationships and Related Transactions; see Proxy
Statement section entitled "Certain Relationships and
Related Transactions".
Item 13. Exhibits and Reports on Form 8-K.
(a) The following Exhibits are attached hereto or incorporated herein by
reference as indicated in the table below:
Exhibit Location if other
No. Title of Document than attached hereto
------- ------------------ --------------------
3.01* Certificate of Incorporation 1998 Form 10-KSB
(as amended to date) Exhibit 3.01
3.04* Bylaws 1991 Form 10-K,
page 74
4.01* Certificate of Designations, Series A 1991 Form 10-K,
Convertible Preferred Stock (as amended) page 94
4.02* Certificate of Designations, Series E 1994 Form 10-KSB,
Convertible Preferred Stock Exhibit 4.05
10.01*# Employment Agreement for Dennis Hunter 1998 Form 10-KSB
Exhibit 10.01
10.02*# Employment Agreement for James Triplett 1997 Form 10-KSB,
Exhibit 10.2
10.03# Compensation Agreement for James
Triplett, April 24, 2000
10.04*# Employment Agreement for Michael Hirst 1997 Form 10-KSB,
Exhibit 10.4
8
<PAGE>
10.05* Stock Purchase Agreement (with Lease 1991 Form 10-K,
Amendment attached as Exhibit A) page 143
(Lifschultz/Penn Yards)
10.06* Shareholder Voting Agreement 1991 Form 10-K,
(Lifschultz/Penn Yards) page 190
10.07*# Employee Stock Option Agreement; 1995 Form 10-KSB,
Standard Form Exhibit 10.07
10.08*# 1989 Stock Option Agreement for 1995 Form 10-KSB,
Dennis Hunter Exhibit 10.08
10.09*# Hart Scientific, Inc. Executive Bonus 1995 Form 10-KSB,
Plan Exhibit 10.12
10.10*# Hart Scientific, Inc. 401(k) Plan 1995 Form 10-KSB
Exhibit 10.13
13.01+ 2000 Annual Report to Shareholders
21.01 List of Subsidiaries of the Registrant
23.01 Consent of Independent Public Accountants
27.01 Financial Data Schedule
------------------
* Denotes exhibits specifically incorporated in this Form 10-KSB by reference to
other filings of the Company pursuant to the provisions of Securities and
Exchange Commission Rule 12b-32 and Regulation S-B, Item 10(f)(2). These
documents are located under File No. 33-17286 at, among other locations, the
Securities and Exchange Commission, Public Reference Branch, 450 5th St., N.W.,
Washington, D.C. 20549.
# Identifies management or compensatory plans, contracts, or arrangements.
+ Certain portions of the Company's 2000 Annual Report to Shareholders, set
forth in Exhibit 13.01, are incorporated by reference into Items 1, 2, 5, 6, and
7 of this Form 10-KSB and, except as so incorporated, the Annual Report to
Shareholders is not deemed to be filed as part of this Form 10-KSB.
(b) Reports on Form 8-K during last quarter of fiscal year 2000.
None.
9
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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 October 26, 2000 /s/ DAVID K. LIFSCHULTZ
-------------------------
David K. Lifschultz
Chief Executive Officer
POWER OF ATTORNEY
-----------------
Know all men by these presents, that each person whose signature appears
below constitutes and appoints each of David K. Lifschultz and Dennis R. Hunter,
jointly and severally, his true and lawful attorney in fact and agent, with full
power of substitution for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this report on Form 10-KSB and to
file the same, with all exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission, hereby ratifying and
confirming all that each said attorney in fact or his substitute(s) may do or
cause to be done by virtue hereof.
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ DAVID K. LIFSCHULTZ Chairman and Chief October 26, 2000
-------------------------- Executive Officer
David K. Lifschultz
/S/DENNIS R. HUNTER Director, President October 25, 2000
-------------------------- and Chief Financial
Dennis R. Hunter Officer
/S/SIDNEY B. LIFSCHULTZ Director October 26, 2000
--------------------------
Sidney B. Lifschultz
Director October __, 2000
--------------------------
James E. Solomon
10
<PAGE>
/S/JOSEPH C. FATONY Director October 25, 2000
--------------------------
Joseph C. Fatony
/S/TIMOTHY O. PONT Controller October 30, 2000
--------------------------
Timothy O. Pont
11
