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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.    20549

FORM 10-Q

For the quarterly period ended September 27, 2003

OR

For the transition period from _____ to  _____

Commission File No. 0-8544

SPEIZMAN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

(704) 559-5777
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

 YES  þ                   NO  ¨

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.

AND SUBSIDIARIES

INDEX

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SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

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SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

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SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to condensed consolidated financial statements.

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  SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Adjustments to reconcile net (loss) to cash used in
      operating activities:

          Deferred income taxes

See accompanying notes to condensed consolidated financial statements.

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SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

See accompanying notes to condensed consolidated financial statements.

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SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.    Interim Financial Statements

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present the Registrant's financial position, the results of operations and changes in cash flow for the periods indicated.  Any interim adjustments are of a normal recurring nature unless otherwise indicated in the Notes to the Condensed Consolidated Financial Statements.

The accounting policies followed by the Registrant are set forth in the Registrant's Form 10-K for the fiscal year ended June 28, 2003, which is incorporated by reference.

Note 2.    Deferred Revenue

The Company, in some instances with its laundry equipment and services business, is engaged in installation projects for customers on a contract basis.  Some contracts call for progress billings.  In such cases, the Company uses the percentage of completion method to recognize revenue whereby sales are recorded based upon the ratio of costs incurred to total estimated costs at completion.  The Company had no deferred revenue at September 27, 2003 and June 28, 2003.

Note 3.    Inventories

Inventories consisted of the following:

		September 27,		June 28,
		2003		2003
		(unaudited)
Machines	$	5,669,000	$	6,470,000
Parts and supplies		4,845,000		4,859,000
Total	$	10,514,000	$	11,329,000

Note 4.    Taxes on Income

Taxes on income are allocated to interim periods on the basis of an estimated annual effective tax rate.  Other comprehensive income (losses), if any, are net of an estimated deferred tax expense (benefit).  Deferred income taxes at September 27, 2003 and June 28, 2003 consisted primarily of net operating loss carryforwards. 

Note 5.    Net Income (Loss) Per Share

Basic net income (loss) per share includes no dilution and is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period.  Diluted net loss per share reflects the potential dilution of securities that could share in the net income of the Company, which consists of stock options using the treasury stock method.  In a period with a net loss, the weighted average shares outstanding will be the same for basic and diluted net loss per share.

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Note 6.    Long-Term Debt

The Company has a revolving credit facility and a line of credit for issuance of Documentary Letters of Credit with SouthTrust Bank, N.A.  Effective March 31, 2003, the Company entered into a Sixth Amendment and Forbearance Agreement relating to its credit facility with SouthTrust Bank, extending the maturity date until December 31, 2003.  The credit facility, as amended, provides a revolving credit facility up to $10.0 million and an additional line of credit for issuance of documentary letters of credit up to $7.5 million.  The availability under the combined facility is limited to a borrowing base as defined by the bank.  The Company, as of September 27, 2003, had borrowings with SouthTrust Bank of $9.4 million under the revolving credit facility and had unused availability of $600,000.  Effective July 1, 2003, interest for all borrowings accrues at prime plus 3.0%.  The facility is secured by substantiallyall the assets of the Company.

Other long-term obligations primarily include trade debt with payment dates beyond one year.  Effective February 2002, the Company restructured its payment terms with Lonati S.p.A., its largest supplier, on current trade obligations amounting to $5.2 million, less $1.0 million owed to the Company.  The net balance of $4.2 million is payable over a 24-month period commencing March 1, 2004.  The restructured terms also include an interest charge at 6% per annum, payable quarterly commencing September 2002.  The agreement also provides the Company through February 2006 with exclusive distribution rights for Lonati’s product line and the ability to purchase inventory in U.S. dollars.  At September 27, 2003, the Company was in compliance with all of its covenants related to the Lonati agreement.

In fiscal 2002, the Company restructured a refundable customer deposit in the amount of $1.2 million included in trade notes payable below, to a two-year period, payable monthly commencing January 31, 2002.  The amount of this obligation bears no interest.

Long-term debt consists of:

		September 27,		June 28,
		2003		2003
		(unaudited)
Trade notes payable	$	4,437,000	$	4,598,000
Current maturities.		(1,445,000)		(1,078,000)
	$	2,992,000	$	3,520,000

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Note 7. Segment Information

The Company operates primarily in two segments of business, textile equipment (“textile”) and laundry equipment and services (“laundry”).  Corporate operations include general corporate expenses, amortization of debt issuance costs, interest expense related to the Company’s credit facility and elimination of intersegment balances.  The table below summarizes financial data by segment. 

Note 8.    Accounting for Stock-Based Compensation

The Company adopted the disclosure only provisions of Statement of Financial Standards No. 123, Accounting for Stock-Based Compensation.  In addition, the Company adopted the disclosure provisions of SFAS No. 148, Accounting for Stock-Based Compensation, which amends the disclosure requirements of SFAS No. 123.  SFAS No. 148 had no impact on net income (loss) or stockholders’ equity.  The Company uses the intrinsic value method of accounting for the plan in accordance with Accounting Principle Board Opinion No. 25, and, therefore, recognizes no compensation expense for stock options.  No stock options were issued for the three months ended September 27, 2003 and September 28, 2002.  Pro forma net income and earnings per share, as if the fair value method in SFAS No. 123 had been used to account for stock-based compensation, and the assumptions used for three months ended September 27, 2003 and September 28, 2002 are as follows:

	For the Three Months ended
		September 27, 2003		September 28, 2002
Income (Loss):
As reported	$	(730,000)	$	(127,000)
Compensation expense		(6,000)		(6,000)
Pro forma	$	(736,000)	$	(133,000)
Basic income (loss) earnings per share:
As reported	$	(0.22)	$	(0.04)
Compensation expense		-		-
Pro forma	$	(0.22)	$	(0.04)

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Note 9.    Commitments And Contingencies

The Company has outstanding commitments backed by letters of credit of approximately $2,073,000 and $4,180,000 at September 27, 2003 and June 28, 2003 respectively, relating to the purchase of machine inventory for delivery to customers.

The Company filed a lawsuit with one of its customers for nonperformance associated with certain sales contracts.  On July 30, 2001, the defendant filed a counterclaim alleging damages due to delay in delivery of machines and defects in operation in the amount of $6.8 million (Canadian) or approximately U.S. $4.3 million, plus interest and penalties in an unspecified amount.  Based upon discussions with its legal counsel, the Company believes the counterclaim is without merit and intends to defend its position vigorously.

In the normal course of business, the Company is named in various other lawsuits. The Company vigorously defends such lawsuits, none of which are expected to have a material impact on operations, either individually or in the aggregate.

Note 10. Operations

As shown in the accompanying financial statements, the Company’s sales have decreased to $9.7 million in fiscal 2004 from $16.8 million in fiscal 2003.  In addition, the Company incurred net losses of $730,000 in fiscal 2004 and $127,000 in fiscal 2003. 

The Company has responded to the decrease in sales by reducing its personnel in all departments, restructuring its commission arrangement with sales personnel, and reducing general and administrative expenses, including a reduction of the lease payments for its main facility.  The Company is currently in discussions with potential lenders regarding refinancing its credit facility, which is scheduled to expire on December 31, 2003.  There can be no assurances the Company will be able to refinance this debt with another lender on a timely basis, on commercially reasonable terms, or at all.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NOTE REGARDING PRIVATE SECURITIES LITIGATION REFORM ACT

This report contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are based on current expectations, estimates, and projections about Speizman's industry, management beliefs, and certain assumptions made by Speizman's management.  Words such as "anticipates," "expects," "intends," "plans," "believes,” "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements.  These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements.  Such risks and uncertainties include those set forth herein under the caption "Other Risk Factors.”  Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.  However, readers should carefully review the risk factors set forth in other reports and documents that the Company files from time to time with the Securities and Exchange Commission.

GENERAL

 Speizman Industries, Inc. is a major distributor of specialized industrial machinery, parts and equipment.  The Company operates primarily in two segments, textile equipment (“textile segment”) and laundry equipment and services (“laundry segment”).  In the textile segment, the Company distributes sock-knitting machines, other knitting equipment, automated boarding, finishing and packaging equipment used in the sock industry, and related parts.  In the laundry segment, the Company sells commercial and industrial laundry equipment, including the distribution of machines and parts as well as providing installation and after sales service.  The Company refers to its operations in the textile segment as Speizman Industries, and the laundry segment as Wink Davis Equipment Co., Inc. (“Wink Davis”).

RESULTS OF OPERATIONS

Revenues decreased by 43.0% to $9.7 million for the first quarter of fiscal 2004 from $16.8 million in the first quarter of fiscal 2003.  Revenues for the textile division decreased to $5.4 million for the first quarter of fiscal 2004 from $8.5 million in the first quarter of fiscal 2003.  The decrease in revenue is due primarily to a 39.0% decrease in the sales of sock knitting equipment as domestic manufacturers continue to have concerns about the impact of foreign made goods on the U.S. market.  Revenues for the laundry division decreased to $4.3 million from $8.3 million last year.  The decline in revenue reflects a 55.0% reduction in sales of new machines in the first quarter of 2004 and reflects the inclusion of two large projects in the first quarter of fiscal 2003.  The Company had no large project sales in the first quarter of 2004.

First quarter gross profit decreased to $1.3 million in fiscal 2004 from $2.6 million in fiscal 2003.  As a percent of revenues, gross margin decreased to 13.6% from 15.5%.  Gross margin decreased in the textile division from 18.1% in 2003 to 12.2% in 2004.  The decrease is due to the reduced shipments of sock knitting equipment, noted above, that have a higher margin than other textile equipment.  The decrease is also due to an increase of $60,000 in inventory reserves for textile equipment.  Gross margins increased in the laundry division from 12.9% in 2003 to 15.5% in 2004.  The increase is due to increased sales of white machines and improved margins for parts and service sales.  The first quarter of fiscal 2004 did not include any sales of large projects as compared to the first quarter of fiscal 2003.  The larger projects typically have a lower gross margin due to the increased competition for those projects. 

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Selling expenses decreased 26.6% to $741,000 in the first quarter of fiscal 2004 from $1.0 million in the same period last year.  As a percentage of sales, selling expenses increased from 6.0% in the first quarter of fiscal 2003 to 7.7% in the first quarter of fiscal 2004.  The decrease in selling expenses for the quarter reflects lower commissions due to lower sales and lower travel expenses as compared to prior years.  The increase as a percent of sales reflects the fixed nature of certain selling expenses.

General and administrative expenses decreased 20.5% to $1.1 million (11.3% of sales) in the first quarter of fiscal 2004 from $1.4 million (8.2% of sales) in the same period last year.  The reduction of $300,000 reflects management’s continued emphasis on cost control, primarily in payroll, professional services, travel and insurance.  The increase as a percentage of sales reflects the reduction in revenues noted above and the fixed nature of certain general and administrative expenses.

Interest expense increased $36,000 in the first quarter of fiscal 2004 as compared to the first quarter of fiscal 2003 due to increased average borrowings on the Company’s revolving credit line and an increase in the interest rate charged on the revolving line of credit.

Benefit for income tax in the current quarter was $221,000 or 23.2% of the current pre-tax loss. This compared to a benefit of $47,000 for income tax for the same period last year or 27% of the current pre-tax loss. The difference between the effective tax rates and the statutory tax rates are due to non-deductible expenses for tax purposes and due to the Company reducing its deferred tax asset by $199,000 as noted in the Critical Accounting Policies.

Net loss for the quarter ended September 27, 2003 was $730,000 or $0.22 per basic and diluted share, compared to a net loss of $127,000 or $0.04 per basic and diluted share for the quarter ended September 28, 2002.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically satisfied its cash requirements for operations from borrowings under credit facility arrangements, and by negotiating extended terms of trade debt. The Company has a revolving credit facility with SouthTrust Bank, N.A. The agreement with SouthTrust as amended on March 31, 2003, expires on December 31, 2003, and provides a revolving line of credit up to $10.0 million and an additional line of credit for issuance of Documentary Letters of Credit up to $7.5 million. The availability under the combined lines of credit is limited by the percentage of accounts receivable and inventory advance rates determined from time to time by SouthTrust. As of September 27, 2003, the Company’s revolving line of credit was $9.4 million and the usage for documentary letters of credit was $2.1 million. Amounts outstanding under the line of credit for direct borrowings bear interest at a rate of prime plus 3% until the expiration of the agreement. In connection with the SouthTrust facility, the Company granted a security interest in all assets of the Company.

Working capital at September 27, 2003 was $6.4 million, a decrease of $940,000 from $7.3 million at June 28, 2003. The working capital ratio at September 27, 2003 was 1.37 compared with 1.39 at June 28, 2003. Net cash used in operating activities was $1.9 million for the three months ended September 27, 2003 compared with $1.0 million used in operating activities during the same period in fiscal 2003. Net cash used in operating activities for the three months ended September 27, 2003 was primarily due to a significant reduction in sales, decrease in accounts payable of $3.4 million along with a decrease in trade notes payable of $161,000 and a decrease in accrued expenses of $275,000. The cash decreases were offset by a decrease in accounts receivable and inventory of $1.7 million and $755,000 respectively. TheCompany typically experiences a net use of cash from operations in its first fiscal quarter as its largest textile equipment vendor, Lonati, closes its plants for the month of August resulting in lower equipment sales in August and thus lower cash collections in September.

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Cash used in investing activities was $22,000 and related to capital expenditures for computer software.

The decrease in accounts receivable of $1.7 million during the first quarter of fiscal 2004 relates to the reduction in revenues experienced during the first quarter of fiscal 2004.

The decrease in inventory was primarily due to sales of equipment held for resale.

The Company’s credit facility with SouthTrust matures December 31, 2003. The Company currently does not have the financial resources to repay this debt when it becomes due and will therefore need to refinance this debt prior to maturity. There is no assurance that the Company will be able to refinance this debt with another lender on a timely basis, on commercially reasonable terms, or at all.  Additionally, the textile industry has continued to experience tightened lending practices from traditional financial institutions which may further hinder Speizman’s ability to refinance this debt, especially in light of Speizman’s recent financial losses. If Speizman is unable to refinance this debt or obtain needed additional capital, it would be required to significantly reduce its operations, dispose of assets and/or sell additional securities on terms that could be dilutive to current stockholders.  There is no assurance that additional financing will be available to the Company.

Contractual Obligations and Commitments

The following table presents our long-term contractual obligations:

The Company did not have any material commitments for capital expenditures or other noncancelable purchase commitments as of September 27, 2003.  The Company had no off balance sheet commitments as of September 27, 2003.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.  Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

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Revenue Recognition

The Company applies the provisions of Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 101, Revenue Recognition (SAB 101) to all revenue transactions.  The major portion of the Company’s revenues consists of sales and commissions on sales of machinery and equipment. The revenue derived from the textile segment is recognized in full at the time of shipment, and for the laundry segment, at time of installation. In some instances the laundry equipment and services business is engaged in installation projects for customers on a contract basis. Some contracts call for progress billings. In such cases, the Company uses the percentage of completion method to recognize revenue whereby sales are recorded based upon the ratio of costs incurred to total estimated costs at completion. Shipping and handling charges to customers are included in revenues. Costs associated with shipping are included in cost of sales.

Impairment of Goodwill

In assessing the value of the Company’s goodwill, management must make assumptions regarding estimated future cash flows and other factors to determine the carrying amount of the assets.  If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets.  Effective July 1, 2001, the Company adopted Statement of Financial Standards No. 142, "Goodwill and Other Intangible Assets" and is now required to analyze goodwill for impairment issues on an annual basis.

The Company performs its annual impairment test of goodwill on the last day of its fiscal year and more often if circumstances surrounding its business dictate that it do so.  For purposes of determining the fair value of its goodwill, the Company computes the net present value of its future cash flows using the five-year average return on investment earned by comparable companies in its industry and compares that to the book value of the reporting segment.

Inventory and Bad Debt Reserves

In assessing the value of the Company’s accounts receivable and inventory, management must make assumptions regarding the collectibility of accounts receivable and the market value of the Company’s inventory.  In the case of accounts receivable, the Company records an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible.  Management also records an additional allowance based on certain percentages of its aged receivables over 90 days old, which are determined based on historical experience and management’s assessment of the general financial conditions affecting its customer base.  If actual collections experience changes, revisions to the allowance may be required.  After all attempts to collect a receivable have failed, the receivable is written off against the allowance.  In the case of inventory, the Company considers recent sales of similar products, trends in the industry and other factors when establishing an inventory reserve for a specific product.  

Deferred Tax Assets

The Company has recorded a deferred tax benefit associated with its net operating losses and other timing differences associated with tax regulations and generally accepted accounting principles, because management believes these assets will be recoverable by offsetting future taxable income.  If the Company does not return to profitability, or if the loss carryforwards cannot be utilized within federal statutory deadlines (currently 20 years), the asset may be impaired.  Consequently, during the first quarter of 2004, the Company reduced its deferred tax asset by $199,000 in light of these uncertainties.

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OUTLOOK

Fiscal 2004 Equipment Bookings – The Company experienced a decline in equipment bookings in the textile and laundry divisions during the fourth quarter of fiscal 2003 that continued to the first quarter of fiscal 2004.  Management expects weak equipment bookings will continue through the second quarter of 2004.  Consistent with the cost saving initiatives that began several years ago, the Company continues to look for ways to control its expenses to help mitigate the adverse effects from the decline in bookings. 

Hosiery Equipment – Shipments of the new generation closed toe sock knitting machine produced by Lonati, S.p.A. of Brescia, Italy, the world’s largest manufacturer of hosiery knitting machines, began in mid-March 2001.  The new generation closed toe machines have been commercially accepted and the Company anticipates they could gradually replace most of the conventional athletic sock machines in the United States and Canada over the next four to six years.

Knitted Fabric Equipment – Although the Company experienced an increase in demand in the fourth quarter of fiscal 2003, the overall market demand for seamless actionwear machines has decreased significantly since its peak two years ago.  It now appears that only the large, well-capitalized underwear and lingerie firms who have significant resources with brand names and direct relationships with major retail outlets will have the ability to purchase significant quantities of additional seamless garment machines.

Wink Davis – The Company, through Wink Davis, maintains a strong presence in the United States industrial laundry segment through its sale of new equipment, parts and services.  Due to the continued sluggishness and overcapacity, the demand for on premise laundry equipment within the hospitality industry has declined significantly in the past 18 – 24 months. 

Other Areas of Development – The Company continually explores opportunities for additional growth including new relationships with manufacturers that have competitive product offerings in its existing market channels.  The Company has begun several initiatives geared toward increasing parts sales and service revenues in both textile and laundry divisions.

EMPLOYEES

As of September 27, 2003, the Company had 98 full-time domestic employees.  The Company’s employees are not represented by a labor union, and the Company has never suffered an interruption of business as a result of a labor dispute.  The Company considers its relations with its employees to be good.

BACKLOG

As of November 10, 2003, the Company’s firm backlog of unfilled equipment orders was approximately $7.7 million.  The period of time required to fill orders varies depending on the model ordered, manufacturers’ production capabilities, and availability of overseas shippers.  The Company typically fills its backlog within 12 months; however, orders constituting the current backlog are subject to customer cancellation, changes in delivery and machine performance.  As a result, the Company’s backlog may not necessarily be indicative of future revenue and will not necessarily lead to revenues in any future period.  Any cancellation, delay or change in orders which constitute our current or future backlog may result in lower than expected revenues.

SEASONALITY AND OTHER FACTORS

There are certain seasonal factors that may affect the Company’s business.  Traditionally, manufacturing businesses in Italy close for the month of August, and the Company’s hosiery customers close for one week in July.  Consequently, no shipments or deliveries, as the case may be, of machines distributed by the Company that are manufactured in Italy are made during these periods which fall in the Company’s first quarter.  In addition, manufacturing businesses in Italy generally close for two weeks in December, during the Company’s second quarter.  Fluctuations of customer orders or other factors may result in quarterly variations in net revenues from year to year.

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EFFECTS OF INFLATION AND CHANGING PRICES

Management believes that inflation has not had a material effect on the Company’s operations.

OTHER RISK FACTORS 

Risks Related to Speizman’s Bank Debt

As of October 31, 2003, Speizman had $8.0 million in borrowings under its line of credit facility with SouthTrust Bank.  The scheduled maturity date for this facility is December 31, 2003.  The Company currently does not have the financial resources to repay this debt when it becomes due and will therefore need to refinance this debt prior to the maturity date.  There is no assurance that the Company will be able to refinance this debt with another lender on a timely basis, on commercially reasonable terms, or at all.  Additionally, the textile industry has continued to experience tightened lending practices from traditional financial institutions which may further hinder Speizman’s ability to refinance this debt, especially in light of Speizman’s recent financial losses.  If Speizman is unable to refinance this debt or obtain needed additional capital, it would be required to significantly reduce its operations, dispose of assets and/or sell additional securities on terms that could be dilutive to current stockholders.

Risks Related to Lonati Agreement

In May 2002, the Company and Lonati S.p.A. entered into an agreement, effective February 2002, providing for the amendment of their agreement under which Speizman distributes Lonati sock-knitting machines in the United States and Canada, and Lonati’s forbearance and payment restructuring with respect to $4.2 million of trade debt owed by Speizman to Lonati.  This amendment and forbearance agreement provides that the following events, among others, will constitute an event of default under Speizman’s distribution agreement with Lonati, as amended:

• failure to pay any amounts owed Lonati when due, which failure continues for 10 days after written notice;
   
• an event of default occurring under Speizman’s existing credit facility with SouthTrust; or
   
• failure to pay other debts when due.

Upon the occurrence of an event of default, Lonati can terminate its distribution agreement with Speizman and can declare all amounts then due Lonati payable in full.

The Lonati and Santoni agreements allow Lonati to make sales directly to customers located in the Company’s distribution territories and pay the Company a commission as determined on a case by case basis.  If direct sales to customers became material, it would have an adverse effect on the Company’s profits since the commissions received by Speizman are typically less than the profits generated by equipment sales.

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Risks Related to Wink Davis Contracts

The Company’s distributor agreements with Pellerin Milnor and Chicago Dryer are renewed on an annual basis.  If the Company lost the distribution rights to either of these product lines, it would have a material adverse impact on the revenues of the Company.

Speizman’s Ability to Return to Profitability

Speizman incurred a net loss of $730,000 in the first quarter of fiscal 2004.  In addition, Speizman incurred net losses of $296,000 in fiscal 2003, $5.3 million in fiscal 2002 and $5.9 million in fiscal 2001.  The Company will need to generate increases in revenues to return to profitability and in order to generate cash flow from future operating activities.  

Speizman’s Large Amount of Debt Could Negatively Impact its Business and its Stockholders

Principally as a result of losses funded over the past three fiscal years, the Company is burdened with a large amount of debt.  Speizman’s large amount of debt could negatively impact its stockholders in many ways, including:

• reducing funds available to support its business operations and for other corporate purposes because portions of cash flow from operations must be dedicated to the payment of its existing debt;
   
• impairing its ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes;
   
• increasing vulnerability to increases in interest rates;
   
• hindering its ability to adjust rapidly to changing market conditions; and
   
• making it more vulnerable to a further downturn in general economic conditions or in its business.

Relationship with Foreign Suppliers

The majority of Speizman Industries’ suppliers for textile parts and textile equipment are based in foreign countries, primarily Italy.  There can be no assurance that Speizman will not encounter significant difficulties in any attempt to enforce any provisions of the agreements with foreign manufacturers, or any agreement that may arise in connection with the placement and confirmation of orders for the machines manufactured by foreign manufacturers or obtain an adequate remedy for a breach of any such provision, due principally that they are foreign companies.

Dependence on Lonati

The Company's operations are substantially dependent on the net revenues generated from the sale of sock knitting and other machines manufactured by both Lonati S.p.A. and Santoni, S.p.A., Brescia, Italy, one of Lonati's subsidiaries, and the Company expects this dependence to continue. Sales of sock knitting and other machines manufactured by Lonati and Santoni generated an aggregate of approximately 30.1% and 31.9% of the Company's net revenues in fiscal 2003 and fiscal 2002, respectively.  The Company amended its agreement with Lonati for the sale of its machines effective February 2002 to be the exclusive agent through February 2006.  The Company has acted as the United States sales agent and distributor for certain machines manufactured by Lonati continuously since 1982.  The cost to the Company of Lonati machines, as well as the delivery schedule of these machines, are at the discretion of Lonati.  Management believes that the Company’s relationship with Lonati will continue to be strong as long as the Company generates substantial sales of Lonati machines; however, there can be no assurance that the Company will be able to do so or that the Company's relationship with Lonati will continue or will continue on its present terms.  Any decision by Lonati to sell machines through another distributor or directly to purchasers would have a material adverse effect on the Company.

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Machine Performance and Delayed Deliveries

During fiscal 2000 and the early part of fiscal year 2001, the Company experienced issues with machine performance and delays from Lonati.  The Company experienced material cancellations or postponements of orders due to these delays and performance issues.  There can be no assurance that delayed deliveries in the future or issues with machine performance on newer technology will not result in the loss or cancellation of significant orders.  The Company also cannot predict situations in Italy such as potential employee strikes or political developments which could further delay deliveries or have other adverse effects on the business of Lonati and the other Italian manufacturers represented by the Company.

Foreign Currency Risk

Prior to November 2000, Speizman Industries’ purchases of foreign manufactured machinery and spare parts for resale were denominated in Italian lira.  For purchases of machines that were denominated in Italian lira or Euro dollars, Speizman generally purchased hedging contracts to compensate for anticipated dollar fluctuations; however, during fiscal year 2001, the Company experienced significant adverse effects utilizing lira hedging contracts for orders that were postponed or delayed.  Prior to fiscal year 2001 and for approximately 30 years, the Company did not experience any adverse effects from utilizing lira hedging contracts.  During fiscal year 2001, the Company arranged with Lonati and its affiliates to purchase its products for resale in U.S. dollars through April 2002.  As of May 2002, Lonati can require purchases to be in either Euro dollars or U.S. dollars.  For purchases of machines that are denominated in Euro dollars, Speizman Industries feels its current practices enable the Company to adjust sales prices, or to commit to hedging contracts that effectively compensate for anticipated dollar fluctuations.  There were no foreign currency hedging contracts in place as of September 27, 2003 and June 28, 2003.

Additionally, international currency fluctuations that result in substantial price level changes could impede or promote import/export sales and substantially impact profits.  Speizman is not able to assess the quantitative effect that such international price level changes could have upon Speizman Industries’ operations.  There can be no assurance that fluctuations in foreign exchange rates will not have an adverse effect on Speizman Industries’ future operations as such fluctuations have in the past.  All of Speizman Industries’ export sales originating from the United States are made in U.S. dollars.

Industry Conditions

The Company's business is subject to all the risks inherent in acting as a distributor including competition from other distributors and other manufacturers of both textile and laundry equipment, as well as the termination of profitable distributor-manufacturer relationships.

The Company's laundry equipment segment is subject to the risks associated with new construction in the hospitality industry. Currently, there is a slowdown in construction of new hotels due to excess room availability as a whole.

The textile segment is subject to the risks associated with certain categories in the textile industry, specifically, for socks, underwear, and actionwear garments.  The textile industry risks relating to socks, underwear, and actionwear garments include the impact of style, consumer preference changes and shipments from foreign producers.  These factors may contribute to fluctuations in the demand for the Company's sock knitting and packaging equipment and knitted fabric equipment products. 

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Nasdaq Listing

The Company’s Common stock has been listed on the Nasdaq SmallCap Market since March 20, 2001 and was listed on the Nasdaq National Market System from October 1993 to March 19, 2001.  The Company’s continued listing of its common stock on the Nasdaq SmallCap Market is subject to certain criteria which include a minimum bid of $1.00 as well as maintaining a minimum market value of public float of $1.0 million.  Since January 2002, the Company’s stock has been trading below $1.00.  The Company has been notified by Nasdaq that it must evidence a closing bid price in its common stock of at least $1.00 by December 12, 2003 and immediately thereafter a closing bid price of at least $1.00 per share for a minimum of ten consecutive days or the Company’s common stock will be delisted. 

On October 28, 2003, the Company filed a proxy statement seeking stockholder approval for a reverse stock split of the Company’s outstanding shares on a 3 for 1, 4 for 1, or 5 for 1 basis.  The reverse stock split will be voted on at the Company’s Annual Stockholders’ Meeting on November 24, 2003.

Nasdaq notified the Company that it may, in its discretion, require that the Company maintain a closing bid price of at least $1.00 per share for a period of time greater than 10 days before determining that the Company has demonstrated the ability to maintain long-term compliance with the $1.00 minimum bid requirement.  The factors Nasdaq has advised the Company it will consider in making such a determination are (1) the amount by which the bid price is above $1.00, (2) trading volume (a lack of which may indicate a lack of market interest at the posted bid price), (3) the market maker montage, and (4) the trend of the stock price.

If the Company is delisted, its common stock might trade in the OTC – Bulletin Board, which is viewed by most investors as a less desirable marketplace.  In such event, the market price of the common stock may be adversely impacted and a stockholder may find it difficult to dispose, or obtain accurate quotations as to the market value, of the Company’s common stock.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to market risks, which include changes in U.S. and international interest rates as well as changes in foreign currency exchange rates as measured against the U.S. dollar and each other.  The Company attempts to reduce these risks by utilizing financial instruments, pursuant to Company policies.

The value of the U.S. dollar affects the Company’s financial results.  Changes in exchange rates may positively or negatively affect the Company’s revenues (as expressed in U.S. dollars), cost of sales, gross margins, operating expenses, and retained earnings.  Where the Company deems it prudent, it engages in hedging those transactions aimed at limiting in part the impact of currency fluctuations.  The Company has historically entered into forward exchange contracts to protect against currency exchange risks associated with the Company’s anticipated and firm commitments of euro-denominated purchases for resale.  The Company had no foreign currency hedging contracts as of September 27, 2003.

These hedging activities provide only limited protection against currency exchange risks.  Factors that could impact the effectiveness of the Company’s programs include volatility of the currency markets, and availability of hedging instruments.  All currency contracts that are entered into by the Company are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure, not for speculation.  Although the Company maintains these programs to reduce the impact of changes in currency exchange rates, when the U.S. dollar sustains a strengthening position against the Euro in which the Company has anticipated purchase commitments, the Company’s earnings could be adversely affected if future sale prices cannot be increased because of market pressures.

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ITEM 4.  CONTROLS AND PROCEDURES

Within 90 days prior to the filing of this report, under the supervision and with the participation of the Company’s management, including the Company’s chief executive and chief financial officers, an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) was performed.  Based on this evaluation, such officers have concluded that the Company’s disclosure controls and procedures were effective as of the date of that evaluation in alerting them in a timely manner to material information relating to the Company required to be included in this report and the Company’s other reports that it files or submits under the Securities Exchange Act of 1934.  There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

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PART II.     OTHER INFORMATION

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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.