<PAGE>
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: AUG. 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
- ------------------------------ ---------------------------------
(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 - 10,297,028 shares - each share $0.01 par value.
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LASER MASTER INTERNATIONAL, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - Aug 31, 1996 3
Condensed Consolidated Statements of Operations for
the Three Months Ended Aug 31, 1996 and Aug 31, 1995 5
Condensed Consolidated Statements of Operations for
the Six Months Ended Aug 31, 1996 and Aug 31, 1995 6
Condensed Consolidated Statements for Cash Flows for
the Six Months Ended Aug 31, 1996 and Aug 31, 1995 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 12
PART II. OTHER INFORMATION 13
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PART I. FINANCIAL INFORMATION
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
AUG 31,
1996
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CURRENT ASSETS:
Cash in Banks $ 701,336
Marketable Securities 380,151
Accounts Receivable - Net 2,573,138
Merchandise Inventory 1,977,934
Prepaid Expenses 33,974
Sundry Receivable 45,790
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TOTAL CURRENT ASSETS $ 5,712,323
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FIXED ASSETS:
Factory Building & Improvements $ 4,691,369
Land - Factory Site 215,000
Machinery & Equipment 8,829,329
Engraving Inventory 878,456
Installation Cost 1,131,857
Furniture & Fixtures 107,524
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TOTAL $15,853,535
Less: Accum. Depreciation 6,125,300
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TOTAL FIXED ASSETS $ 9,728,235
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OTHER ASSETS:
Deferred Charges $ 95,775
Short Term Investments 51,006
Intangible Asset 53,504
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TOTAL OTHER ASSETS $ 200,285
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TOTAL ASSETS $15,640,843
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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
AUG 31,
1996
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CURRENT LIABILITIES:
Accounts Payable $ 362,867
Accrued Expenses & Taxes 58,734
Current Portion of Long Term Debt 561,668
Loan - Merrill Lynch 1,139,830
Loan - Officer 65,837
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TOTAL CURRENT LIABILITIES $ 2,188,936
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LONG TERM LIABILITIES:
Non-Current Portion of Long Term
Debt $ 5,343,332
Other Accrued Expenses 53,504
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TOTAL LONG TERM LIABILITIES $ 5,396,836
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TOTAL LIABILITIES $ 7,585,772
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STOCKHOLDERS' EQUITY:
Capital Stock - Authorized
50,000,000 Shares at 1c Par Value
Issued and Outstanding 10,297,028 $ 102,970
Shares at 8/31/96 Paid in Capital 5,427,596
Retained Earnings 2,524,505
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TOTAL STOCKHOLDERS' EQUITY $ 8,055,071
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TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $15,640,843
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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
Aug 31, Aug 31,
1996 1995
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REVENUES $ 3,405,430 $ 1,975,207
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Depreciation Expense $ 117,552 $ 176,902
Cost of Sales 2,434,805 1,389,231
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TOTAL COST OF SALES $ 2,552,357 $ 1,566,133
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GROSS PROFIT $ 853,073 $ 409,074
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OPERATING EXPENSES:
Selling Expenses $ 296,207 $ 394,576
General & Administrative Expenses 109,708 187,227
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TOTAL OPERATING EXPENSES $ 405,915 $ 581,803
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OPERATING PROFIT $ 447,158 $ (172,729)
Moving Expenses -
Interest & Finance Charges 133,471 139,045
Capital Gain - (1,241,702)
Interest & Dividend Income (27,127) -
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NET EARNINGS BEFORE FIT $ 340,814 $ 929,928
Less: FIT Provision - Current 115,877 237,964
Tax Effect of NOL Carryforward (115,877) (35,682)
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NET EARNINGS FOR THE PERIOD $ 340,814 $ 727,646
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EARNINGS PER SHARE * $ .03 $ .12
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DIVIDENDS PER SHARE -0- -0-
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* Earnings per share are based on 11,157,028 weighted shares
outstanding at Aug 31, 1996 & 5,958,335 shares outstanding at 8/31/95.
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 NINE MONTHS ENDED
Aug 31, Aug 31,
1996 1995
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REVENUES $ 8,099,641 $ 6,407,630
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Depreciation Expense $ 384,901 $ 419,374
Cost of Sales 5,084,953 4,254,106
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TOTAL COST OF SALES $ 5,469,854 $ 4,673,480
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GROSS PROFIT $ 2,629,787 $ 1,734,150
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OPERATING EXPENSES:
Selling Expenses $ 1,342,265 $ 1,129,690
General & Administrative Expenses 715,897 534,264
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TOTAL OPERATING EXPENSES $ 2,058,162 $ 1,663,954
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OPERATING PROFIT $ 571,625 $ 70,196
Interest & Finance Charges 409,709
Capital Gain - 365,572
Interest & Dividend Income (62,294) (1,241,702)
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NET EARNINGS BEFORE FIT $ 224,210 $ 946,326
Less: FIT Provision - Current 76,231 237,964
Tax Effect of NOL Carryforward (76,231) (35,682)
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NET EARNINGS FOR THE PERIOD $ 224,210 $ 744,044
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EARNINGS PER SHARE * .02 $ .12
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DIVIDENDS PER SHARE -0- -0-
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* Earnings per share are based on 11,157,028 weighted shares outstanding at
Aug 31, 1996 and on Aug 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
Aug 31 Aug 31
1996 1995
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Net Cash Flow From Operating
Activities:
Net Income $ 224,210 $ 744,044
Items Reflected in Net Income
Not Requiring Cash:
Depreciation & Amortization 384,901 419,374
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$ 609,111 $ 1,163,418
Cash Flow Provided From Operations
Accounts Receivable $ (268,877) $ (57,441)
Inventories (1,271,970) (500,089)
Prepaid Expenses 56,136 (7,232)
Sundry Receivable (45,790) 12,437
Accounts Payable (635,038) (35,998)
Accrued Expenses (7,253) (339,065)
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Cash Flow Provided by Operations $(1,563,681) $ 49,987
Cash Flow Provided from (used for)
Investment Purposes:
Additions to Fixed Assets $ (832,171) $(3,379,859)
Increase in Other Assets 115,531 658,469
Marketable Securities (24,768) 3,443,954
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Total Cash Flow Provided from $ (741,408) $ 722,564
Investment Purposes
Cash Flow Provided From (used for)
Financing Purposes:
Increase in Long Term Debt (1,131,320) (2,457,928)
Capital Contributed 3,328,999 -
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Net Cash Flow $ (107,410) $(1,685,377)
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 $ 701,336 $ 331,340
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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 nine months ended Aug 31, 1996 and
Aug 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.
08/31/96 08/31/95
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Depreciation charged to
Cost of Sales $384,901 $419,374
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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 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.
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.
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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.
NOTE 12. EARNINGS PER SHARE - 11,157,028 WEIGHTED SHARES COMMON STOCK -
PAR VALUE $0.0l at 8/31/96 and 5,958,335 shares at 8/31/95.
Nine Months Ended
08/31/96 08/31/95
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Net earnings per share - $ .03 $ .12
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 the previous quarter the company completed a private
placement which resulted in net proceeds of $3,328,999 for the
issuance of 4,000,000 additional shares of stock.
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<PAGE>
MANAGEMENT'S COMPARATIVE DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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REVENUES
For the nine months ended Aug 31, 1996 revenues increased 26% from the prior
year. For the current quarter revenues increased 72% over the comparable
quarter last year. The increase in revenues was due to the
fact that the company's new computerized, automated, robotic press began
full operations in July. This press triples the company's printing capacity and
can print many more applications than the 2 six color
presses can. Management expects sales to be higher in the next quarter
than in this quarter.
GROSS PROFIT
For the nine months ended Aug 31, 1996 gross profit was 32% as compared to 27%
for the same period in the previous year. The increase is a result of the fact
that raw material prices have decreased and that the company
can operate more efficiently in its new plant than in the old plant.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses was 25% of sales for the nine
months ended Aug 31, 1996 and 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 July. Management anticipates that as sales volume increases, SG&A
expenses should be reduced as a percentage of sales.
INTEREST EXPENSE
Interest expense increased for the first nine 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
Aug 31, 1996 the Company had working capital of $3,523,387. 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 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 in the previous quarter which
resulted in net proceeds of $3,328,999 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.
--------------------------------
(Registrant)
10/11/96 /s/ Mendel Klein
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Date MENDEL KLEIN, PRESIDENT
10/11/96 /s/ Leah Klein
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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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