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, 1996
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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)
(Issuer's telephone number) (212) 397-7788
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(Former name, former address and former fiscal year, if
changed since last report.)
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Common Stock 55,569,495
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Class Outstanding at October 31, 1996
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
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LIFSCHULTZ INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
31-Oct-96 31-Jul-96
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ASSETS
Current Assets
Cash and cash equivalents $ 632,000 $1,424,000
Marketable Securities 968,000 601,000
Trade accounts receivable 1,914,000 1,774,000
Related Party Receivable 34,000
Inventories 1,586,000 1,488,000
Other current assets 93,000 60,000
Total current assets ---------- ----------
5,193,000 5,381,000
Property held for sale or lease, net 2,761,000 2,973,000
Property & equipment, net 627,000 489,000
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Total Assets $8,581,000 $8,843,000
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LIFSCHULTZ INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (continued)
(unaudited)
31-Oct-96 31-Jul-96
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Note payable to a bank $ 400,000 $ 182,000
Trade accounts payable 677,000 311,000
Accrued liabilities 655,000 1,623,000
Notes payable 98,000 50,000
Notes payable to shareholders 50,000 120,000
Accounts payable and accrued
liabilities past due 174,000 321,000
Current portion of long-term debt 15,000 0
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Total current liabilities 2,069,000 2,607,000
Long-term debt, less current portion 0 0
Shareholders' equity:
Convertible preferred stock, par value
$.01; authorized 4,900,000 shares
Series A; issued and outstanding
5,200 shares - -
Series B; issued and outstanding
0 shares 0 8,000
Series E; issued and outstanding
21,231 shares 0 1,000
Common stock, par value $.001;
authorized 80,000,000 shares;
issued and outstanding,
55,569,495 shares 56,000 44,000
Additional paid-in capital 10,978,000 10,978,000
Common stock subscriptions receivable
from related parties (15,000) (15,000)
Treasury Stock (at cost) (157,000) (157,000)
Retained (deficit) (4,350,000) (4,623,000)
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Total shareholders' equity 6,512,000 6,236,000
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Total liabilities and shareholders'
equity $8,581,000 $8,843,000
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LIFSCHULTZ INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Three months ended
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31-Oct-96 31-Oct-95
REVENUES: ----------- ----------
Sales $ 2,699,000 $2,355,000
COSTS AND EXPENSES:
Cost of products sold 1,358,000 1,181,000
Selling, general and admin. 946,000 835,000
Research and development 84,000 62,000
Interest Expense 13,000 6,000
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Total costs and expenses 2,401,000 2,084,000
Earnings before income taxes
and extraordinary item 298,000 271,000
Income Taxes 25,000 35,000
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Earnings before extraordinary item 273,000 236,000
EXTRAORDINARY ITEM
Forgiveness of Debt, net of tax effect - 1,062,000
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Net Earnings 273,000 1,298,000
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NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Income before extraordinary item 0.005 0.004
Extraordinary item 0.000 0.018
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Net earnings 0.005 0.022
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Common Shares Outstanding 60,559,000 59,723,000
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LIFSCHULTZ INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended
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31-Oct-96 31-Oct-95
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OPERATING ACTIVITIES
Income $ 273,000 $1,298,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization (A) 246,000 99,000
Gain on debt Forgiveness
(extraordinary item) 0 1,062,000
Changes in assets and liabilities:
Trade Accounts receivable (140,000) 276,000
Inventory (97,000) (136,000)
Other assets (1,000) (3,000)
Accounts payable 220,000 313,000
Accrued liabilities (1,073,000) (270,000)
Net cash provided (used) by operating ----------- -----------
activities (572,000) 515,000
INVESTING ACTIVITIES
Purchase of Property and Equipment (A) (171,000) (52,000)
Purchase of Treasury Bills (367,000) -
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Net cash provided (used) by
investing activities (538,000) (52,000)
FINANCING ACTIVITIES
Proceeds from notes payable and long-term
obligations 98,000 0
Proceeds from Bank Line of Credit 224,000 -
Proceeds from notes payable
and long-term obligations (6,000) (11,000)
Proceeds from sale of equity securities 2,000 0
Net cash provided (used) by financing ----------- ----------
activities 318,000 (11,000)
Net increase (decrease) in cash (792,000) 452,000
Cash and cash equivalents at beginning
of period 1,424,000 1,139,000
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Cash and cash equivalents at end of
period $ 632,000 $1,591,000
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(A) Net of Disposals
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NOTES TO FINANCIAL STATEMENTS
NOTE 1- ACCOUNTING POLICIES
In February 1992 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting
for Income Taxes," which is effective for fiscal years beginning after
December 15, 1992. Accordingly, the Company has implemented Statement
109 in the accompanying financial statements, without effect on
reported income.
NOTE 2- EARNINGS PER SHARE
Earnings per common and common equivalent shares for October 31, 1996
and 1995 is based on the weighted average number of common shares
actually outstanding during the period plus the shares that would be
outstanding assuming conversion of convertible preferred stock and
exercise of stock options and warrants, all of which are common stock
equivalents.
Item 2. Management's Discussion and Analysis or Results of Operation.
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Results of Operations
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Total revenues in Lifschultz Industries' first quarter, ended
October 31, 1996, increased 14.6% to $2,699,000 for the first quarter
versus $2,355,000 for the same period last year. Revenues for
Lifschultz Industries' subsidiary, Hart Scientific, were $2,594,000
for the first quarter.
Hart Scientific's gross margins were 48% for the first quarter
versus 48% for the same period last year.
General and Administrative costs for the first quarter were
$497,000 for Hart Scientific versus $386,000 for the same period last
year, $175,000 for Lifschultz Industry subsidiary Lifschultz Fast
Freight versus $173,000 for the same period last year, and $33,000 for
Lifschultz Industries versus $20,000 for the same period last year.
General and Administrative costs increased at Hart Scientific as Hart
added support personnel to keep pace with its growth and compensation
was increased to keep a competitive salary and wages structure.
Research and Development costs increased to $84,000 in the first
quarter versus $62,000 for the same period last fiscal year. Hart
Scientific continues its efforts to develop and introduce new
products.
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Hart Scientific had $306,000 in marketing costs in the first
quarter versus $259,000 for the same period last year. Hart continues
to be very aggressive in its efforts to market new products and expand
distribution of existing products.
Consolidated income before extraordinary items increased 15.7% to
$273,000 in the first quarter versus $236,000 in the same period last
year. The consolidated net income for the quarter of $273,000
compares to a net income for the same period last year of $1,298,000.
The consolidated net income (income after extraordinary items) for the
quarter last year includes an extraordinary gain of $1,062,000 for
forgiveness of debt (Lifschultz Fast Freight negotiated a reduction of
a $1,262,000 debt down to $200,000). The consolidated net income for
the current quarter does not include any extraordinary items. Hart
Scientific's net profit for the first quarter was $312,000.
Financial Condition and Liquidity
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The Company's current ratio at October 31, 1996 was 2.51 to 1
versus 2.06 to 1 at July 31, 1996. The current ratio improved to 2.51
to 1 at the end of the first quarter versus 1.66 on October 31, 1995.
The debt ratios of the Company have been improved significantly
in the last year as debt has been reduced and operating profits have
been healthy. Management hopes to continue this trend. The Company
will need additional capital to support the growth of Hart Scientific
and the activities (primarily remaining debt reduction) of Lifschultz
Fast Freight. 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 $275,000 remaining on its bank line
of credit if these funds are required. The Company expects that
Lifschultz Fast Freight will complete payment on much of its remaining
debt in the current fiscal year, after which cash flow from the Lifschultz
Fast Freight subleases will be used in other areas of the Company.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits.
27.0 Financial Data Schedule
(b) Reports on Form 8-K.
1. On September 19, 1996, the Company filed a Form 8-K describing
(under Item 5--Other Events) the Company's September 17, 1996 public
announcement of conversions of Company preferred stock to Company common
stock and the positive effect such conversion had on the Company's common
stock per share net worth when calculated to reflect liquidation value.
SIGNATURES
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.
LIFSCHULTZ INDUSTRIES, INC.
Date 12 December 1996 By: DENNIS R. HUNTER
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Dennis R. Hunter
President and Chief
Financial Officer
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Exhibit Index
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Exhibit No. Description
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27 Financial Data Schedule.
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