.lit conversion

[bubulac]

I am not sure why, but for one of the .lit files I tried to convert into epub or lrf for Sony 505 the output is just row after row of continuous text, no paragraphs, no indentation, nothing... All the formatting is lost in the conversion?

The source looks like this:

Ullman had asked a question he hadn't caught. That was bad; Ullman was the
type of man who would file such lapses away in a mental Rolodex for later
consideration.
"I'm sorry?"
"I asked if your wife fully understood what you would be taking on here. And
there's your son, of course." He glanced down at the application in front of
him. "Daniel. Your wife isn't a bit intimidated by the idea?"
"Wendy is an extraordinary woman."
"And your son is also extraordinary?"

And the output looks like this (in both epub and lrf):

of the desk--under the circumstances. Ullman had asked a question he hadn't caught. That was bad; Ullman was the type of man who would file such lapses away in a mental Rolodex for later consideration. "I'm sorry?" "I asked if your wife fully understood what you would be taking on here. And there's your son, of course." He glanced down at the application in front of him. "Daniel. Your wife isn't a bit intimidated by the idea?" "Wendy is an extraordinary woman." "And your son is also extraordinary?"

Any suggestions?...
Thank you,