SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSBA
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: February 29, 1996 Commission File No.: 2-76262-NY
LASER MASTER INTERNATIONAL, INC.
(Exact name of Registrant as Specified in its charter)
New York 11-2564587
(State of Incorporation) (IRS Employee Identification No.)
1000 First Street, Harrison, New Jersey 07029
(Address of Principal Offices)
(201) 482-7200
Telephone Number
N/A
(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
--------- ---------
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 - 6,958,335 shares - each share $0.01 par value.
<PAGE>
LASER MASTER INTERNATIONAL INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - February 29, 1996 3
Condensed Consolidated Statements of Operations for the
Three Months Ended February 29, 1996 and February 28, 1995 5
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended February 29, 1996 and February 28, 1995 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION 12
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<PAGE>
PART I. FINANCIAL INFORMATION
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
FEBRUARY 29,
1996
CURRENT ASSETS:
Cash in Banks $ 829,690
Marketable Securities 369,621
Accounts Receivable - Net 1,709,312
Merchandise Inventory 1,273,402
Prepaid Expenses
89,984
Subscription Receivable 1,000,000
-----------
TOTAL CURRENT ASSETS $ 5,272,009
-----------
FIXED ASSETS:
Factory Building & Improvements $ 4,691,369
Land - Factory Site 215,000
Machinery & Equipment 8,308,562
Engraving Inventory 878,456
Installation Cost 1,078,187
Furniture & Fixtures 107,524
-----------
TOTAL $15,279,098
Less: Accum. Depreciation 5,856,827
-----------
TOTAL FIXED ASSETS $ 9,422,271
-----------
OTHER ASSETS:
Deferred Charges $ 98,981
Short Term Investments 355,344
Intangible Asset 53,504
-----------
TOTAL OTHER ASSETS $ 507,829
-----------
TOTAL ASSETS $15,202,109
===========
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
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<PAGE>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES
FEBRUARY 29,
1996
-----------
CURRENT LIABILITIES:
Accounts Payable $ 1,149,808
Accrued Expenses & Taxes 41,113
Current Portion of Long Term Debt 521,668
Loan - Merrill Lynch 1,529,872
Loan - Suppliers 287,745
Loan - Officer 260,065
-----------
TOTAL CURRENT LIABILITIES $ 3,790,271
-----------
LONG TERM LIABILITIES:
Non-Current Portion of Long Term
Debt $ 5,881,665
Other Accrued Expenses 53,504
----------
TOTAL LONG TERM LIABILITIES $ 5,935,169
-----------
TOTAL LIABILITIES $ 9,725,440
-----------
STOCKHOLDERS' EQUITY:
Capital Stock - Authorized
8,000,000 Shares at 1c Par Value
Issued and Outstanding 6,958,335
Shares at 2/29/96 $ 69,583
Capital in Excess Par 3,131,984
Retained Earnings 2,275,102
-----------
TOTAL STOCKHOLDERS' EQUITY $ 5,476,669
-----------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $15,202,109
===========
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
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<PAGE>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
----------- -----------
SALES
$ 2,154,235 $ 2,000,685
----------- -----------
Depreciation Expense $ 116,428 $ 122,144
Cost of Sales 1,218,150 1,199,509
----------- -----------
TOTAL COST OF SALES 1,334,578 $ 1,321,653
----------- -----------
GROSS PROFIT 819,657 $ 679,032
----------- -----------
OPERATING EXPENSES:
Selling Expenses $ 268,659 $ 236,081
General & Administrative Expenses 438,548 216,068
Interest & Finance Charges 137,643 135,792
----------- -----------
TOTAL OPERATING EXPENSES $ 844,850 $ 587,941
----------- -----------
NET EARNINGS - OPERATIONS $ (25,193) $ 91,091
Add: Other Income - -
----------- -----------
NET EARNINGS BEFORE FIT $ (25,193) $ 91,091
Less: FIT Provision - Current - 30,971
Tax Effect of NOL Carryforward - (23,471)
----------- -----------
NET EARNINGS FOR THE PERIOD $ (25,193) $ 83,591
=========== ===========
EARNINGS PER SHARE * $ .00 $ .01
=========== ===========
DIVIDENDS PER SHARE -0- -0-
=========== ==========
* Earnings per share are based on 6,958,335 shares outstanding at February
29, 1996 and 5,958,335 February 28, 1995.
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
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<PAGE>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
FEBRUARY 29 FEBRUARY 28,
1996 1995
----------- -----------
Net Cash Flow From Operating
Activities:
Net Income $ (25,193) $ 83,591
Items Reflected in Net Income
Not Requiring Cash:
Depreciation & Amortization 116,428 122,144
----------- -----------
$ 91,235 $ 205,735
Cash Flow Provided From Operations
Accounts Receivable $ 594,949 $ (104,064)
Inventories (567,437) 1,867
Prepaid Expenses 124 15,451
Subscription Receivable (1,000,000) 12,437
Accounts Payable 151,903 124,630
Accrued Expenses (24,874) 134,582
Current Portion of Long Term Debt - (18,711)
Other - (2,610)
----------- -----------
Cash Flow Provided by Operations $ (754,100) $ 369,317
Cash Flow Provided from (used for)
Investment Purposes:
Additions to Fixed Assets $ (257,734) $(3,633,282)
Increase in Other Assets (192,013) 604,214
Marketable Securities (14,237) 2,506,209
----------- -----------
Total Cash Flow Provided from
Investment Purposes $ (463,984) $ (522,859)
Cash Flow Provided From (used for)
Financing Purposes:
Increase in Long Term Debt 239,028 (35,985)
Capital Contributed 1,000,000 -
----------- -----------
Total Cash Flow From Financing $ 1,239,028 $ (35,985)
Net Cash Flow $ 20,944 $ (189,527)
Cash and Cash Equivalents at
Beginning of Period 808,746 2,016,717
----------- -----------
Cash and Cash Equivalents at
End of Period $ 829,690 $ 1,827,190
=========== ===========
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
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<PAGE>
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 three
months ended February 29, 1996 and February 28, 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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<PAGE>
(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. The inventories used in computing cost sales
for each of the period presented are as follows:
Raw Work in Finished
Materials Process Goods Total
---------- --------- --------- ----------
02/29/96 $ 728,912 $ 334,642 $ 209,848 $1,273,402
02/28/95 226,543 64,251 110,989 401,783
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.
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<PAGE>
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.
02/29/96 02/28/95
-------- --------
Depreciation charged to
Cost of Sales $116,428 $122,144
======== ========
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 l0% per year of the total library
inventory of complete patterns on sleeves.
NOTE 9. TAX LOSS CARRYFORWARD
On November 30, l995 the company had a net operating loss carryforward
of $229,120.
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<PAGE>
NOTE 10. REMUNERATION OF DIRECTORS AND OFFICERS
Annual
Name Capacity in which remuneration was received Salary
- ------------ ------------------------------------------- --------
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.
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 bank has waived the
violation.
NOTE 12. EARNINGS PER SHARE - 6,958,335 SHARES COMMON STOCK -
PAR VALUE $0.0l at 2/29/96 and 5,958,335 shares at 2/28/95.
Fiscal years ended
02/29/96 02/28/95
-------- --------
Net earnings per share - $ .00 $ .01
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
The Company initiated a lawsuit against HBE Leasing contending that HBE
overcharged interest and other charges during the time the Company
borrowed funds from. HBE Leasing countersued the Company and its
principal stockholder, Mr. Klein. The Company's legal counsel believes
the counter claim of HBE does not have merit.
NOTE 15 SUBSEQUENT EVENT
Subsequent to this quarter the company is in the process of receiving
$3,000,000 of additional capital in a private placement for 3,000,000
additional shares of stock being issued subject to regulatory approval.
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<PAGE>
MANAGEMENT'S COMPARATIVE DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
RESULTS OF OPERATIONS
---------------------
REVENUES
For the three months ended February 29, 1996 revenues increased 7% from the
prior year. For the quarter ended February 28, 1995 revenues increased 5% over
the same period from the prior year. This increase was primarily the result of
increased sales volume through orders from existing customers. The new 8 color
press was still being repaired during the quarter but is now operational and is
contributing to production.
GROSS PROFIT
For the three months ended February 29, 1996 gross profit was 38% as compared to
34% for the same period in the previous year. The increase is a result of
increased efficiency due to increased use of more sophisticated computer driven
equipment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 56% for the three months
ended February 29, 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 as the company is moving into new markets to be serviced by
the new 8 color press which began contributing in the second quarter.
INTEREST EXPENSE
Interest expense increased for the first three months of 1995 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
February 29, 1996 the Company had working capital of $1,482,000. 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. The company is in the process of raising an additional two million
dollars of capital through a private placement.
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<PAGE>
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. As reported
in the Company's 10-K, the Company's subsidiary, Flexo-Craft Prints,
Inc., is a plaintiff in an action pending in the Supreme Court, State
of New York, County of Kings, against HBE Leasing Corporation (HBE).
The claim is basically for over-payment of interest to HBE and
misrepresentation by HBE as a result of an agreement by and between
the Company's subsidiary and HBE. The Company, since the action has
commenced, has received permission from the court to amend its
complaint against HBE, and has served an amended complaint on HBE. HBE
has served an amended verified answer and counter- claim. HBE has
counterclaimed against the Company and its principal shareholder,
Mendel Klein, claiming that Mr. Klein personally guaranteed the
agreement wit HBE and that should HBE be responsible to the Company,
Mr. Klein, in effect is responsible to it ( HBE). The relief sought by
the Company's subsidiary is punitive damages in the sum of $1,000,000
in addition to legal fees. The counterclaim interposed by HBE seeks the
sum of $400,000 in actual damages as a result of claimed alleged
misrepresentation by HBE and punitive damages in the sum of $2,000,000.
In addition, the same relief is sought against Mendel Klein, as
Guarantor of the Company's subsidiary's obligation to HBE.
HBE has also filed a notice of appeal to the Court's decision,
permitting the Company to amend its complaint against HBE. The appeal
was dismissed and the case is preceding.
It is the Company's belief that it has a meritorious claim against HBE,
and that the counterclaim of HBE does not have merit and that there is
a defense to said claim.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
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<PAGE>
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.
--------------------------------
(Registrant)
8/12/96 /s/ Mednel Klein
----------------- --------------------------------
Date MENDEL KLEIN, PRESIDENT
8/12/96 /s/ Leah Klein
----------------- --------------------------------
Date LEAH KLEIN, VICE PRESIDENT/SEC'Y
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<PAGE>
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.
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<PERIOD-START> DEC-01-1995
<PERIOD-END> FEB-29-1996
<FISCAL-YEAR-END> NOV-30-1996
<CASH> 829,690
<SECURITIES> 369,621
<RECEIVABLES> 1,790,076
<ALLOWANCES> 80,764
<INVENTORY> 1,273,402
<CURRENT-ASSETS> 5,272,009
<PP&E> 15,279,098
<DEPRECIATION> 5,856,827
<TOTAL-ASSETS> 15,202,109
<CURRENT-LIABILITIES> 3,790,271
<BONDS> 5,881,665
0
0
<COMMON> 3,201,567
<OTHER-SE> 2,275,102
<TOTAL-LIABILITY-AND-EQUITY> 15,202,109
<SALES> 2,154,235
<TOTAL-REVENUES> 2,154,235
<CGS> 1,218,150
<TOTAL-COSTS> 1,334,578
<OTHER-EXPENSES> 707,207
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137,643
<INCOME-PRETAX> (25,193)
<INCOME-TAX> 0
<INCOME-CONTINUING> (25,193)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,193)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
