<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: MAY 31, 1997 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--10,615,207 shares--each share $0.01 par value.
<PAGE>
LASER MASTER INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION PAGE
- ---------------------------------------------------------------------------------------------------------- -----------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--May 31, 1997 3
Condensed Consolidated Statements of Operations for the Three Months Ended May 31, 1997 and May 31, 1996 5
Condensed Consolidated Statements of Operations for the Six Months Ended May 31, 1997 and May 31, 1996 6
Condensed Consolidated Statements for Cash Flows for the Six Months Ended May 31, 1997 and May 31, 1996 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
</TABLE>
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
MAY 31,
1997
------------
<S> <C>
CURRENT ASSETS:
Cash in Banks............................................................... $ 91,555
Marketable Securities....................................................... 424,620
Accounts Receivable--Net.................................................... 2,195,219
Merchandise Inventory....................................................... 2,023,307
Prepaid Expenses............................................................ 93,435
------------
TOTAL CURRENT ASSETS............................................................ $ 4,828,136
------------
FIXED ASSETS:
Factory Building & Improvements............................................. $ 4,945,501
Land--Factory Site.......................................................... 215,000
Machinery & Equipment....................................................... 8,122,395
Engraving Inventory......................................................... 878,456
Installation Cost........................................................... 942,797
Furniture & Fixtures........................................................ 119,401
------------
TOTAL........................................................................... $ 15,223,550
Less: Accum. Depreciation....................................................... 5,361,548
------------
TOTAL FIXED ASSETS.............................................................. $ 9,862,002
OTHER ASSETS:
Deferred Charges............................................................ $ 88,691
Short Term Investments...................................................... 434,342
Intangible Asset............................................................ 43,459
------------
TOTAL OTHER ASSETS.............................................................. $ 566,492
------------
TOTAL ASSETS.................................................................... $ 15,256,630
------------
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
-3-
<PAGE>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES
<TABLE>
<CAPTION>
MAY 31,
1997
-------------
<S> <C>
CURRENT LIABILITIES:
Accounts Payable........................................................... $ 281,299
Accrued Expenses & Taxes................................................... 11,643
Current Portion of Long Term Debt.......................................... 561,669
Loan--Merrill Lynch........................................................ 1,010,887
-------------
TOTAL CURRENT LIABILITIES...................................................... $ 1,865,498
-------------
LONG TERM LIABILITIES:
Non-Current Portion of Long Term Debt...................................... $ 5,308,331
Other Accrued Expenses..................................................... 43,459
Deferred Taxes............................................................. 38,016
-------------
TOTAL LONG TERM LIABILITIES.................................................... $ 5,389,806
-------------
TOTAL LIABILITIES.............................................................. $ 7,255,304
-------------
STOCKHOLDERS' EQUITY:
Capital Stock--Authorized 50,000,000 Shares at 1c Par Value Issued and
Outstanding 10,615,207................................................... $ 114,715
Shares at 5/31/97 Paid in Capital........................................ 5,415,851
Retained Earnings........................................................ 2,470,760
-------------
TOTAL STOCKHOLDERS' EQUITY..................................................... $ 8,001,326
-------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY....................................... $ 15,256,630
-------------
-------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
-4-
<PAGE>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1997 1996
------------ ------------
<S> <C> <C>
REVENUES.......................................................... $ 2,405,049 $ 2,539,976
------------ ------------
Depreciation Expense.............................................. $ 147,618 $ 150,921
Cost of Sales..................................................... 1,631,159 1,431,998
------------ ------------
TOTAL COST OF SALES............................................... $ 1,778,777 $ 1,582,919
------------ ------------
GROSS PROFIT...................................................... $ 626,272 $ 957,057
------------ ------------
OPERATING EXPENSES:
Selling Expenses.............................................. $ 507,602 $ 777,399
General & Administrative Expenses............................. 261,800 167,641
------------ ------------
TOTAL OPERATING EXPENSES.......................................... $ 769,402 $ 945,040
------------ ------------
NET EARNINGS--OPERATIONS.......................................... $ (143,130) $ 12,017
Interest Expense.............................................. 93,131 138,595
Interest & Dividend Income.................................... (19,288) (35,167)
------------ ------------
NET EARNINGS BEFORE FIT........................................... $ (216,973) $ (91,411)
Less: FIT Provision--Current.................................. -- --
Tax Effect of NOL Carryforward................................ -- --
------------ ------------
NET EARNINGS FOR THE PERIOD....................................... $ (216,973) $ (91,411)
------------ ------------
------------ ------------
EARNINGS PER SHARE *.............................................. $ (.02) $ (.01)
------------ ------------
------------ ------------
DIVIDENDS PER SHARE............................................... -0- -0-
------------ ------------
------------ ------------
</TABLE>
* Earnings per share are based on 10,615,207 shares outstanding at May 31,
1997 and on May 31, 1996 6,958,335.
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
-5-
<PAGE>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1997 1996
------------ ------------
<S> <C> <C>
REVENUES.......................................................... $ 4,899,843 $ 4,694,211
------------ ------------
Depreciation Expense.............................................. $ 295,236 $ 267,349
Cost of Sales..................................................... 3,202,455 2,650,148
------------ ------------
TOTAL COST OF SALES............................................... $ 3,497,691 $ 2,917,497
------------ ------------
GROSS PROFIT...................................................... $ 1,402,152 $ 1,776,714
------------ ------------
OPERATING EXPENSES:
Selling Expenses.............................................. $ 894,314 $ 1,046,058
General & Administrative Expenses............................. 526,418 606,189
------------ ------------
TOTAL OPERATING EXPENSES.......................................... $ 1,420,732 $ 1,652,247
------------ ------------
NET EARNINGS--OPERATIONS.......................................... (18,579) $ 124,467
Interest Expense.............................................. 200,749 276,238
Interest & Dividend Income.................................... (27,674) (35,167)
------------ ------------
NET EARNINGS BEFORE FIT........................................... $ (191,654) $ (116,604)
Less: FIT Provision--Current.................................. -- --
Tax Effect of NOL Carryforward................................ -- --
------------ ------------
NET EARNINGS FOR THE PERIOD....................................... $ (191,654) $ (116,604)
------------ ------------
------------ ------------
EARNINGS PER SHARE *.............................................. (.02) (.01)
------------ ------------
------------ ------------
DIVIDENDS PER SHARE............................................... -0- -0-
------------ ------------
------------ ------------
</TABLE>
* Earnings per share are based on 10,615,207 shares outstanding at May 31,
1997 and on May 31, 1996 6,958,335.
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
-6-
<PAGE>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
<TABLE>
<CAPTION>
MAY 31 MAY 31
1997 1996
----------- -------------
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net Income.................................................... $ (191,654) $ (116,604)
Items Reflected in Net Income Not Requiring Cash:
Depreciation & Amortization................................... 295,236 267,349
----------- -------------
$ 103,582 $ 150,745
Cash Flow Provided From Operations Accounts Receivable............ $ 390,130 $ 632,455
Inventories................................................... 89,887 (1,240,283)
Prepaid Expenses.............................................. (53,708) 122
Accounts Payable.............................................. (290,494) (583,613)
Accrued Expenses.............................................. (37,663) (53,051)
----------- -------------
Cash Flow Provided by Operations.................................. $ 201,734 $ (1,093,625)
Cash Flow Provided from (used for) Investment Purposes:
Additions to Fixed Assets..................................... $ (47,544) $ (779,418)
Increase in Other Assets...................................... (249,306) (217,365)
Marketable Securities......................................... (19,397) (18,765)
----------- -------------
Total Cash Flow Provided from..................................... $ (316,247) $ (1,015,548)
Investment Purposes
Cash Flow Provided From (used for) Financing Purposes:
Payment of Debt............................................... (340,709) (510,207)
Capital Contributed........................................... 150,000 3,500,000
----------- -------------
Cash Flow Used for Financing...................................... $ (190,709) $ 2,989,793
----------- -------------
Net Cash Flow..................................................... $ (305,222) $ 880,620
Cash and Cash Equivalents at Beginning of Period.................. 396,777 808,746
----------- -------------
Cash and Cash Equivalents at End of Period........................ $ 91,555 $ 1,689,366
----------- -------------
----------- -------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
-7-
<PAGE>
NOTE 1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS AND CONSOLIDATIING
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.
3. PASSPORT PAPERS INC & EAST RIVER ARTS INC.
These Companies are Sales Corporations which sell products
printed by Flexo Craft Prints Inc. They each sell under their own
labels and in their respective markets.
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 May 31, 1997 and May 31, 1996.
-8-
<PAGE>
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.
(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 Fleet 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.
-9-
<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.
<TABLE>
<CAPTION>
05/31/97 05/31/96
---------- ----------
<S> <C> <C>
Depreciation charged to Cost of Sales................................. $ 295,236 $ 267,349
---------- ----------
---------- ----------
</TABLE>
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, l996 the company had a net operating loss
carryforward of $7,296.
-10-
<PAGE>
NOTE 10. REMUNERATION OF DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
ANNUAL
NAME CAPACITY IN WHICH REMUNERATION WAS RECEIVED SALARY
- -------------------------------------------------- -------------------------------------------------- ----------
<S> <C> <C>
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-
</TABLE>
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 Fleet Bank of New Jersey
for letters of credit in the amount of $5,351,979 issued in
conjunction with the New Jersey Tax Exempt Bonds which financed the
company's new factory building and 8 color press. Fleet 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--10,615,207 SHARES COMMON STOCK - PAR VALUE
$0.0l at 5/31/97 and 6,958,335 shares at 5/31/96.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------
<S> <C> <C>
05/31/97 05/31/96
----------- -----------
Net earnings per share -.................................................. $ (.02) $ (.01)
</TABLE>
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 $130,495 or
4% of accounts receivable.
-11-
<PAGE>
MANAGEMENT'S COMPARATIVE DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED
MAY 31, 1997 AND MAY 31, 1996
RESULTS OF OPERATIONS
---------------------
REVENUES
For the six months ended May 31, 1997 revenues increased 4% from the prior
year. For the quarter ended May 31, 1997 revenues decreased 5% from the same
period from the prior year. This decrease was primarily the result of
decreased sales volume through orders from existing customers. Management has
hired additional sales people to develop business in new markets such as home
furnishing, packaging and plates which the company is capable of servicing.
There has been positive feedback from potential customers in these markets
but any actual orders most likely won't be shipped until the next fiscal
year. Management attributes most of the loss for this quarter to the non
performance of Passport Papers, one of the subsidiaries. Passport contributed
an insignificant amount of sales but absorbed significant expenses in all
areas, therefore management has decided to discontinue Passport by the end of
the year. In addition management has taken steps to significantly cut
overhead until sales reach a much higher level.
GROSS PROFIT
For the three months ended May 31, 1997 gross profit was 26% as compared to
31% for the same period in the previous year. The previous year there was a
significant drop in raw material prices in the first quarter which accounted
for the high gross profit margin. In addition gross profit was adversely
affected by production problems with the 8 color press. The manufacturer is
upgrading and modifying the press in January 1998 and has already shipped the
new parts which are on the premises.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased 19% for the three
months ended May 31, 1997 over the same period for the previous year. This
was as a result of the Company's attempt to control costs through significant
reductions of general and administration costs.
INTEREST EXPENSE
Interest expense decreased for the first six months of 1997 as compared to
the same period for the previous year. This was as a result of lower 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, 1997 the Company had working capital of $2,962,638.
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.
-12-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LITIGATION
None
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
-13-
<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)
7/10/97 /s/ Mendel Klein
------------ ------------------------------------
DATE MENDEL KLEIN, PRESIDENT
7/10/97 /s/ Leah Klein
------------ ------------------------------------
DATE LEAH KLEIN, VICE PRESIDENT/SEC'Y
-14-
<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.
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-1-1996
<PERIOD-END> MAY-31-1997
<CASH> 91,555
<SECURITIES> 424,620
<RECEIVABLES> 2,325,714
<ALLOWANCES> (130,495)
<INVENTORY> 2,023,307
<CURRENT-ASSETS> 4,828,136
<PP&E> 15,223,550
<DEPRECIATION> (5,361,548)
<TOTAL-ASSETS> 15,256,630
<CURRENT-LIABILITIES> 2,865,498
<BONDS> 0
0
0
<COMMON> 114,715
<OTHER-SE> 7,886,611
<TOTAL-LIABILITY-AND-EQUITY> 15,256,630
<SALES> 4,899,843
<TOTAL-REVENUES> 4,889,843
<CGS> 3,497,691
<TOTAL-COSTS> 3,497,691
<OTHER-EXPENSES> 1,393,058
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200,749
<INCOME-PRETAX> (191,654)
<INCOME-TAX> 0
<INCOME-CONTINUING> (191,654)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (191,654)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
