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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: MAY 31, 1996 Commission File No.: 2-76262-NY
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LASER MASTER INTERNATIONAL, INC.
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(Exact name of Registrant as Specified in its charter)
New York 11-2564587
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(State of Incorporation) (IRS Employee Identification No.)
1000 First Street, Harrison, New Jersey 07029
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(Address of Principal Offices)
(201) 482-7200
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Telephone Number
N/A
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(Former name, address and 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 Act of 1934
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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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report:
Common Stock - 10,113,335 shares - each share $0.01 par value.
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MANAGEMENT'S COMPARATIVE DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
MAY 31, 1996 and MAY 31, 1995
RESULTS OF OPERATIONS
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REVENUES
For the six months ended May 31, 1996 revenues increased 6% from the prior year.
This increase was primarily the result of increased sales volume through orders
from existing customers and increased rental income from Harrison Realty.
GROSS PROFIT
For the six months ended May 31, 1996 gross profit was 38% as compared to 30%
for the same period in the previous year. The increase is a result of the fact
that raw material prices have decreased.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 25% for the six months
ended May 31, 1996 over the same period for the previous year. This was as a
result of the Company's attempt to generate additional sales volume through
expanded promotional efforts and additional sales commissions and additional
start up expenses because the company is gearing up for a higher sales volume in
future periods due to the expected contributions from the 8 color press which
began full operations in May.
INTEREST EXPENSE
Interest expense increased for the first six months of 1996 as compared to the
same period for the previous year. This was as a result of higher levels of
debt.
FINANCIAL CONDITION AND LIQUIDITY
The Company is well positioned to meet anticipated future capital requirements
necessary for purchase of equipment and financing of current operations. At May
31, 1996 the Company had working capital of $3,482,546. Liquidity is sustained
principally through funds provided from operations with unused bank lines of
credit available to provide additional sources of capital when required.
Management does not anticipate any difficulties in financing existing
operations.
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PART I. FINANCIAL INFORMATION
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
MAY 31,
1996
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CURRENT ASSETS:
Cash in Banks $ 1,689,366
Marketable Securities 374,149
Accounts Receivable - Net 1,671,806
Merchandise Inventory 1,946,248
Prepaid Expenses 89,986
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TOTAL CURRENT ASSETS $ 5,771,555
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FIXED ASSETS:
Factory Building & Improvements $ 4,691,369
Land - Factory Site 215,000
Machinery & Equipment 8,830,246
Engraving Inventory 878,456
Installation Cost 1,078,187
Furniture & Fixtures 107,524
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TOTAL $15,800,782
Less: Accum. Depreciation 6,007,748
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TOTAL FIXED ASSETS $ 9,793,034
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OTHER ASSETS:
Deferred Charges $ 96,899
Short Term Investments 382,778
Deposit on Machinery 53,504
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TOTAL OTHER ASSETS $ 533,181
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TOTAL ASSETS $16,097,770
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The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
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LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES
MAY 31,
1996
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CURRENT LIABILITIES:
Accounts Payable $ 414,292
Accrued Expenses & Taxes 12,936
Current Portion of Long Term Debt 521,668
Loan - Merrill Lynch 1,258,313
Loan - Officer 81,800
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TOTAL CURRENT LIABILITIES $ 2,289,009
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LONG TERM LIABILITIES:
Non-Current Portion of Long Term
Debt $ 5,869,999
Other Accrued Expenses 53,504
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TOTAL LONG TERM LIABILITIES $ 5,923,503
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TOTAL LIABILITIES $ 8,212,512
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STOCKHOLDERS' EQUITY:
Capital Stock - Authorized
50,000,000 Shares at 1c Par Value
Issued and Outstanding 10,113,335 $ 101,133
Shares at 5/31/96 Paid in Capital 5,600,434
Retained Earnings 2,183,691
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TOTAL STOCKHOLDERS' EQUITY $ 7,885,258
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TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $16,097,770
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The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
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LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED
MAY 31, MAY 31,
1996 1995
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REVENUES $ 2,539,976 $ 2,431,738
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Depreciation Expense $ 150,921 $ 120,328
Cost of Sales 1,431,998 1,636,752
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TOTAL COST OF SALES $ 1,582,919 $ 1,757,080
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GROSS PROFIT $ 957,057 $ 674,658
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OPERATING EXPENSES:
Selling Expenses $ 777,399 $ 499,033
General & Administrative Expenses 167,641 159,583
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TOTAL OPERATING EXPENSES $ 945,040 $ 658,616
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NET EARNINGS - OPERATIONS $ 12,017 $ 16,042
Interest Expense 138,595 90,735
Interest & Dividend Income (35,167)
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NET EARNINGS BEFORE FIT $ (91,411) $ (74,693)
Less: FIT Provision - Current - (7,500)
Tax Effect of NOL Carryforward - -
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NET EARNINGS FOR THE PERIOD $ (91,411) $ (67,193)
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EARNINGS PER SHARE * $ (.01) $ .01
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DIVIDENDS PER SHARE -0- -0-
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* Earnings per share are based on 10,113,335 shares outstanding at May 31, 1996
and on May 31, 1995 5,958,335.
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
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LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED
MAY 31, MAY 31,
1996 1995
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REVENUES $ 4,694,211 $ 4,432,423
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Depreciation Expense $ 267,349 $ 242,472
Cost of Sales 2,650,148 2,864,875
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TOTAL COST OF SALES $ 2,917,497 $ 3,107,347
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GROSS PROFIT $ 1,776,714 $ 1,325,076
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OPERATING EXPENSES:
Selling Expenses $ 1,046,058 $ 735,114
General & Administrative Expenses 606,189 347,037
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TOTAL OPERATING EXPENSES $ 1,652,247 $ 1,082,151
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NET EARNINGS - OPERATIONS $ 124,467 $ 242,925
Interest Expense 276,238 226,527
Interest & Dividend Income (35,167)
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NET EARNINGS BEFORE FIT $ (116,604) $ 16,398
Less: FIT Provision - Current - -
Tax Effect of NOL Carryforward - -
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NET EARNINGS FOR THE PERIOD $ (116,604) $ 16,398
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EARNINGS PER SHARE * (.01) $ .00
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DIVIDENDS PER SHARE -0- -0-
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* Earnings per share are based on 10,113,335 shares outstanding at May 31, 1996
and on May 31, 1995 5,958,335.
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
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LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
MAY 31 MAY 31
1996 1995
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Net Cash Flow From Operating
Activities:
Net Income $ (116,604) $ 16,398
Items Reflected in Net Income
Not Requiring Cash:
Depreciation & Amortization 267,349 242,472
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$ 150,745 $ 258,870
Cash Flow Provided From Operations
Accounts Receivable $ 632,455 $ (199,765)
Inventories (1,240,283) (565,871)
Prepaid Expenses 122 6,173
Sundry Receivable - 12,437
Accounts Payable (583,613) 249,650
Accrued Expenses (53,051) (125,523)
Current Portion of Long Term Debt - (52,048)
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Cash Flow Provided by Operations $(1,093,625) $ (416,077)
Cash Flow Provided from (used for)
Investment Purposes:
Additions to Fixed Assets $ (779,418) $(4,344,445)
Increase in Other Assets (217,365) 639,146
Marketable Securities (18,765) 3,132,673
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Total Cash Flow Provided from $(1,015,548) $ (572,626)
Investment Purposes
Cash Flow Provided From (used for)
Financing Purposes:
Payment of Debt (510,207) (104,475)
Capital Contributed 3,500,000
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Net Cash Flow $ 880,620 $(1,093,178)
Cash and Cash Equivalents at
Beginning of Period 808,746 2,016,717
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Cash and Cash Equivalents at
End of Period $ 1,689,366 $ 923,539
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The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
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NOTE 1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS AND CONSOLIDATING
PRINCIPLES
The consolidated financial statements include the accounts
of Laser Master International Inc. and its wholly owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
The company was founded in 1981 and prints for the textile
industry and the gift wrap paper industry. The company sells
its products and services nationwide through its direct sales
force and resellers. In addition the company has a real estate
division that rents space in the factory buildings owned by
the company.
All intercompany transactions and balances have been eliminated
in accordance with established accounting principles.
Name and brief description of companies under common control:
1. FLEXO-CRAFT PRINTS INC.
This company has for approximately 15 years been engaged in the
business of commercial printing and engraving, utilizing a laser
technique. The company principally produces an extensive line of
patterns and designs which are sold to industrial customers engaged
in the manufacture of varied end products.
2. HARRISON REALTY CORP.
This company owns and operates a 240,000 sq. ft. factory
building in Harrison, New Jersey. There are two
unaffiliated tenants currently occupying 49% of the
space.
a. METHOD OF ACCOUNTING FOR THE BUSINESS COMBINATION:
This business combination has been accounted for as a
reorganization under common control.
b. PERIOD FOR WHICH RESULTS OF OPERATIONS OF THE MERGED
COMPANIES ARE INCLUDED IN THE INCOME STATEMENT OF THE
PARENT COMPANY:
The income statement of Laser Master International Inc.
reflects the result of its operations on a consolidated
basis for the six months ended May 31, 1996 and May 31, 1995.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
(a) The statements are prepared on the accrual basis of
accounting.
(b) Inventory valuation:
Inventories are stated at the lower of cost (first-in,
first-out) or market.
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(c) Depreciation of property, plant, equipment and furniture is
calculated on the straight line method based on estimated useful
lives of 10 to 33 years for buildings and improvements and 3 to
10 years for machinery, equipment and furniture.
(d) Taxes:
Laser Master International, Inc. is a "C" corporation with the
Federal, State and City taxing authorities. All corporate taxes
are accrued and paid on the corporate level.
NOTE 3. ACCOUNTS RECEIVABLE
The account on the balance sheet of Laser Master International Inc.
referred to as "Accounts Receivable-Net" represents amounts due from
customers for goods sold and delivered on a current basis. The accounts
receivable so stated are encumbered to one of the company's lenders.
NOTE 4. INVENTORIES
The inventories are valued at the lower of cost or market on a
first-in, first-out basis.
NOTE 5. FACTORY BUILDING AND IMPROVEMENTS
One of the wholly owned subsidiaries of the company, Harrison Realty
Corp., owns the land and the building situated at 1000 First Street,
Harrison, New Jersey. The building is encumbered by a mortgage obtained
from National Westminster Bank and the New Jersey EDA.
NOTE 6. MACHINERY AND EQUIPMENT
The machinery and equipment is owned by the wholly owned subsidiary
Flexo-Craft Prints Inc. It consists of various pieces of heavy
equipment, the acquisition of which has been financed on an individual
basis at the time of purchase and installation. For details of these
encumbrances, reference is made to the consolidated schedule of total
debt in the 10K.
NOTE 7. DEPRECIATION
Property, plant and equipment is stated at cost. Depreciation
is computed by applying the straight-line method to individual
items. Where accelerated depreciation methods are used for tax
purposes, deferred income taxes may be recorded. Maintenance and
repairs were charged to expenses as incurred.
05/31/96 05/31/95
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Depreciation charged to
Cost of Sales $267,349 $242,472
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The annual depreciation rates used are as follows:
Building and Improvements 3%
Machinery and Equipment 10% - 14.3%
Furniture and Fixtures 10%
NOTE 8. ENGRAVING INVENTORY
The company's principal operating subsidiary, Flexo-Craft Prints Inc.
is engaged in the manufacture of designs and patterns which by means
of a laser engraving process grooves are engraved on a rubber sleeve,
and by means of a computer color separation (up to six colors)
fabricate the matrix for the printing phase of operations.
In order to present to the trade a wide selection of proprietary
patterns and designs, the company maintains a constant library of
approximately 5,000 sleeves. In case of obsolete or discontinued
designs, sleeves become reusable after mechanically grinding flat the
old pattern and vulcanizing the surface.
For accounting purposes, an obsolescence factor is charged based on the
entire cost of discontinued patterns, exclusive of the extended life of
the reusable rubber sleeves. Historically this method results in a
provision for depreciation of 10% per year of the total library
inventory of complete patterns on sleeves.
NOTE 9. TAX LOSS CARRYFORWARD
On November 30, 1995 the company had a net operating loss carryforward
of $229,120.
NOTE 10. REMUNERATION OF DIRECTORS AND OFFICERS
Annual
Name Capacity in which remuneration was received Salary
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Mendel Klein President, Treasurer, Chairman of the Board $100,000
Leah Klein Vice President, Secretary, Director -0-
Mirel Spitz Vice President, Office Manager, Director -0
Mr. Mendel Klein, pursuant to an employment contract entered into with
the company which became effective upon completion of the public
offering, receives an annual salary of $100,000. Additionally, Mr.
Klein will participate in group life, accident and hospitalization
insurance, provide for all key employees, and he will have the use of
a company owned automobile. No other officer or director has a
contract of employment with the company. There are no consulting
agreements in existence between the company and any officers.
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NOTE 11. CONTINGENT LIABILITIES
The Company is contingently liable to National Westminster
Bank of New Jersey for letters of credit in the amount of
$6,137,129 issued in conjunction with the New Jersey Tax
Exempt Bonds which financed the company's new factory
building and 8 color press. Nat West Bank has a 1st lien on
the assets of Harrison Realty and 2nd and 3rd liens on the
assets of Flexo-Craft. The company was in violation of one of
the loan covenants with Nat West Bank, however the company
expects the violation to be waived.
NOTE 12. EARNINGS PER SHARE - 10,113,335 SHARES COMMON STOCK - PAR VALUE $0.01
at 5/31/96 and 5,958,335 shares at 5/31/95.
Six Months Ended
05/31/96 05/31/95
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Net earnings per share - $ (.01) $ .00
NOTE 13. ALLOWANCE FOR DOUBTFUL ACCOUNTS
Bad debts are written off as they occur. An allowance for doubtful
accounts has been established in the amount of $80,764 or 4% of
accounts receivable.
NOTE 14. LITIGATION
There are no legal proceedings other than that which was
described in the Company's 10K.
NOTE 15. PRIVATE PLACEMENT
During this quarter the company completed a private placement
which resulted in net proceeds of $3,500,000 for the issuance of
4,000,000 additional shares of stock.
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PART II. OTHER INFORMATION
ITEM 1. LITIGATION
There are no proceedings contemplated or threatened by any Government
or agency against the Company or any of its subsidiaries.
There are no legal proceedings of any kind other than that
which is described in the Company's 10K.
ITEM 2. CHANGES IN SECURITIES
Private placement was completed which resulted in net proceeds
of $3,500,000 and the issuance of 4,000,000 additional shares
of stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LASER MASTER INTERNATIONAL, INC.
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(Registrant)
7/11/96 /s/ MENDEL KLEIN
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Date MENDEL KLEIN, PRESIDENT
7/11/96 /s/ LEAH KLEIN
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Date LEAH KLEIN, VICE PRESIDENT/SEC'Y
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The Registrant or any of its consolidated subsidiaries have
not consummated, not have they participated in a business combination
during any of the periods covered by the report, nor has a business
combination occurred during the current fiscal year.
There have been no material retroactive prior period
adjustments made during any period included in this report.
Accordingly, there have been no material prior period adjustments
which had an effect upon net income, total and per share, nor upon the
balance of retained earnings.
