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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: February 28, 1997 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 - 10,471,452 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
Consolidated Balance Sheets - February 28, 1997 3-4
Consolidated Statements of Operations for the
Three Months Ended February 28, 1997 and February 29, 1996 5
Consolidated Statements of Cash Flows for the
Three Months Ended February 28, 1997 and February 29, 1996 6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 11
PART II. OTHER INFORMATION 12
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PART I. FINANCIAL INFORMATION
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
FEBRUARY 28,
1997
CURRENT ASSETS:
Cash in Banks $ 470,887
Marketable Securities 416,505
Accounts Receivable - Net 2,572,179
Merchandise Inventory 2,093,864
Prepaid Expenses 31,428
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TOTAL CURRENT ASSETS $ 5,584,863
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FIXED ASSETS:
Factory Building & Improvements $ 4,938,566
Land - Factory Site 215,000
Machinery & Equipment 8,105,403
Engraving Inventory 878,456
Installation Cost 931,057
Furniture & Fixtures 107,524
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TOTAL $15,176,006
Less: Accum. Depreciation 5,213,930
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TOTAL FIXED ASSETS $ 9,962,076
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OTHER ASSETS:
Deferred Charges $ 89,270
Restricted Cash 308,644
Intangible Asset 43,459
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TOTAL OTHER ASSETS $ 441,373
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TOTAL ASSETS $15,988,312
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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
FEBRUARY 28,
1997
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CURRENT LIABILITIES:
Accounts Payable $ 621,145
Accrued Expenses & Taxes 48,674
Current Portion of Long Term Debt 561,669
Loan - Merrill Lynch 1,059,549
Loan - Officer 65,837
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TOTAL CURRENT LIABILITIES $ 2,356,874
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LONG TERM LIABILITIES:
Non-Current Portion of Long Term
Debt $ 5,431,664
Other Accrued Expenses 43,459
Deferred Taxes 38,016
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TOTAL LONG TERM LIABILITIES $ 5,513,139
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TOTAL LIABILITIES $ 7,870,013
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STOCKHOLDERS' EQUITY:
Capital Stock - Authorized
50,000,000 Shares at 1c Par Value
Issued and Outstanding 10,471,452
Shares at 2/29/97 $ 104,715
Capital in Excess Par 5,325,851
Retained Earnings 2,687,733
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TOTAL STOCKHOLDERS' EQUITY $ 8,118,299
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TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $15,988,312
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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 OPERATIONS
FOR THE THREE MONTHS ENDED
FEBRUARY 28, FEBRUARY 29,
1997 1996
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REVENUES
$ 2,494,795 $ 2,154,235
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Depreciation Expense $ 147,618 $ 116,428
Cost of Sales 1,571,296 1,218,150
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TOTAL COST OF SALES 1,718,914 1,334,578
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GROSS PROFIT 775,881 819,657
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OPERATING EXPENSES:
Selling Expenses $ 386,712 $ 268,659
General & Administrative Expenses 264,618 438,548
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TOTAL OPERATING EXPENSES $ 651,330 707,207
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OPERATING PROFIT $ 124,551 $ 112,450
Interest & Finance Charges $ 107,618 $ 137,643
Interest & Dividend Income (8,386) -
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NET EARNINGS - BEFORE FIT $ 25,319 $ (25,193)
Less: FIT Provision - Current - -
Tax Effect of NOL Carryforward - -
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NET EARNINGS FOR THE PERIOD $ 25,319 $ (25,193)
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EARNINGS PER SHARE * $ .00 $ .00
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DIVIDENDS PER SHARE -0- -0-
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* Earnings per share are based on 10,471,452 shares outstanding at
February 28, 1997 and 6,958,335 February 29, 1996.
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
THREE MONTHS ENDED
FEBRUARY 28 FEBRUARY 29,
1997 1996
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Net Cash Flow From Operating
Activities:
Net Income $ 25,319 $ (25,193)
Items Reflected in Net Income
Not Requiring Cash:
Depreciation & Amortization 147,618 116,428
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$ 172,937 $ 91,235
Cash Flow Provided From Operations
Accounts Receivable $ 13,170 $ 594,949
Inventories 19,330 (567,437)
Prepaid Expenses 8,299 124
Subscription Receivable - (1,000,000)
Accounts Payable 49,392 151,903
Accrued Expenses (672) (24,874)
Current Portion of Long Term Debt - -
Other - -
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Cash Flow Provided by Operations $ 262,456 $ (754,100)
Cash Flow Provided from (used for)
Investment Purposes:
Additions to Fixed Assets $ - $ (257,734)
Increase in Other Assets (124,187) (192,013)
Marketable Securities (11,282) (14,237)
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Total Cash Flow Provided from
Investment Purposes $ (135,469) $ (463,984)
Cash Flow Provided From (used for)
Financing Purposes:
Increase in Long Term Debt (102,877) 239,028
Capital Contributed 50,000 1,000,000
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Total Cash Flow From Financing $ (52,877) $ 1,239,028
Net Cash Flow $ 74,110 $ 20,944
Cash and Cash Equivalents at
Beginning of Period 396,777 808,746
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Cash and Cash Equivalents at
End of Period $ 470,887 $ 829,690
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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.
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 February 28, 1997 and February 29, 1996.
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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.
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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.
02/28/97 02/29/96
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Depreciation charged to
Cost of Sales $147,618 $ 80,250
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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, l996 the company had a net operating loss carryforward
of $7,296.
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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.
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 - 10,471,452 SHARES COMMON STOCK - PAR VALUE
$0.0l at 2/28/97 and 6,958,335 shares at 2/29/96.
Fiscal years ended
02/28/97 02/29/96
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Net earnings per share - $ .00 $ .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
$130,000 or 4% of accounts receivable.
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MANAGEMENT'S COMPARATIVE DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
RESULTS OF OPERATIONS
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REVENUES
For the three months ended February 28, 1997 revenues increased 16% from the
prior year. For the quarter ended February 29, 1996 revenues increased 7% over
the same period from the prior year. This increase was primarily the result of
increased sales volume through orders from existing customers. Management
anticipates that the rate of increase of revenues when compared to the previous
year will widen as the year goes on. This is based on the fact the company has
signed contracts and received orders that should benefit the second half of the
year.
GROSS PROFIT
For the three months ended February 28, 1997 gross profit was 31% as compared to
39% 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.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased 8% for the three months
ended February 28, 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 three 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
February 28, 1997 the Company had working capital of $3,227,989. 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
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
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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)
4/10/97 /s/ Mendel Klein
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Date MENDEL KLEIN, PRESIDENT
4/10/97 /s/ Leal 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.
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