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, 1998 Commission File No.: 2-76262-NY
------------- ----------
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
----------------------------------------------------------------
(Address of Principal Offices)
(201) 482-7200
----------------
Telephone Number
N/A
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(Former name, address and fisc al 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 Re gistrant 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 shares of the issuer's
classes of common stock, as of the close of the period covered by this report:
Common Stock - 10,615,380 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 - Aug 31, 1998 3
Condensed Consolidated Statements of Operations for
the Three Months Ended Aug 31, 1998 and Aug 31, 1997 5
Condensed Consolidated Statements of Operations for
the Nine Months Ended Aug 31, 1998 and Aug 31, 1997 6
Condensed Consolidated Statements for Cash Flows for
the Nine Months Ended Aug 31, 1998 and Aug 31, 1997 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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<PAGE>
PART I. FINANCIAL INFORMATION
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
AUG 31,
1998
-----------
CURRENT ASSETS:
<S> <C>
Cash in Banks ........................................ $ 105,575
Marketable Securities ................................ 490,248
Accounts Receivable - Net ............................ 2,898,583
Merchandise Inventory ................................ 1,638,440
Prepaid Expenses ..................................... 29,218
-----------
TOTAL CURRENT ASSETS ...................................... $ 5,162,064
-----------
FIXED ASSETS:
Factory Building & Improvements ...................... $ 4,995,427
Land - Factory Site .................................. 215,000
Machinery & Equipment ................................ 8,171,395
Engraving Inventory .................................. 909,029
Installation Cost .................................... 953,524
Furniture & Fixtures ................................. 134,849
-----------
TOTAL ..................................................... $15,379,224
-----------
Less: Accum. Depreciation ................................. 5,913,632
-----------
TOTAL FIXED ASSETS ........................................ $ 9,465,592
-----------
OTHER ASSETS:
Deferred Charges ..................................... $ 72,093
Short Term Investments ............................... 80,177
Loans Receivable ..................................... 389,107
-----------
TOTAL OTHER ASSETS ........................................ $ 541,377
-----------
TOTAL ASSETS .............................................. $15,169,033
===========
</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
<TABLE>
<CAPTION>
LIABILITIES
AUG 31,
1998
-----------
CURRENT LIABILITIES:
<S> <C>
Accounts Payable ....................................... $ 836,631
Accrued Expenses & Taxes ............................... 187,553
Current Portion of Long Term Debt ...................... 543,335
Loan - Merrill Lynch ................................... 1,591,885
-----------
TOTAL CURRENT LIABILITIES ................................... $ 3,159,404
-----------
LONG TERM LIABILITIES:
Non-Current Portion of Long Term Debt .................. $ 4,233,332
-----------
TOTAL LONG TERM LIABILITIES ................................. $ 4,233,332
-----------
TOTAL LIABILITIES ........................................... $ 7,392,736
-----------
STOCKHOLDERS' EQUITY:
Capital Stock - Authorized
50,000,000 Shares at 1c Par Value
Issued and Outstanding 10,615,380 ................. $ 106,154
Shares at 8/31/98 Paid in Capital ................. 5,424,412
Unrealized Gain ................................... 10,000
Retained Earnings ................................. 2,235,731
-----------
TOTAL STOCKHOLDERS' EQUITY .................................. $ 7,776,297
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY .................... $15,169,033
===========
</TABLE>
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>
A LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
Aug 31, Aug 31,
1998 1997
----------- -----------
<S> <C> <C>
REVENUES $ 4,119,471 $ 3,482,725
----------- -----------
Depreciation Expense $ 118,348 $ 147,397
Cost of Sales 2,810,346 2,670,251
----------- -----------
TOTAL COST OF SALES $ 2,928,694 $ 2,817,648
----------- -----------
GROSS PROFIT $ 1,190,777 $ 665,077
----------- -----------
OPERATING EXPENSES:
Selling Expenses $ 387,598 $ 486,588
General & Administrative Expenses 598,628 170,841
----------- -----------
TOTAL OPERATING EXPENSES $ 986,226 $ 657,429
----------- -----------
OPERATING PROFIT $ 204,551 $ 7,648
Interest & Finance Charges 100,686 134,277
Interest & Dividend Income (8,578) (908)
----------- -----------
NET EARNINGS BEFORE FIT $ 112,443 $ (125,721)
Less: FIT Provision - Current -- --
Tax Effect of NOL Carryforward -- --
----------- -----------
NET EARNINGS FOR THE PERIOD $ 112,443 $ (125,721)
=========== ===========
EARNINGS PERIOD SHARE * $ .01 $ (.01)
=========== ===========
DIVIDENDS PER SHARE -0- -0-
=========== ===========
<FN>
* Earnings per share are based on 10,615,380 weighted shares outstanding at
8/31/98 & 10,615,207 shares outstanding at 8/31/97.
</FN>
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
-5-
<PAGE>
A LASER MASTERINTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED
<TABLE>
<CAPTION>
Aug 31, Aug 31,
1998 1997
------------ ------------
<S> <C> <C>
REVENUES $ 10,584,541 $ 8,382,568
------------ ------------
Depreciation Expense $ 355,043 $ 442,633
Cost of Sales 7,248,605 5,872,706
------------ ------------
TOTAL COST OF SALES $ 7,603,648 $ 6,315,339
------------ ------------
GROSS PROFIT $ 2,980,893 $ 2,067,229
------------ ------------
OPERATING EXPENSES:
Selling Expenses $ 1,166,203 $ 1,380,902
General & Administrative Expenses 1,388,196 697,258
------------ ------------
TOTAL OPERATING EXPENSES $ 2,554,399 $ 2,078,160
------------ ------------
OPERATING PROFIT $ 426,494 $ (10,931)
Interest & Finance Charges 311,010 335,026
Interest & Dividend Income (31,316) (28,582)
------------ ------------
NET EARNINGS BEFORE FIT $ 146,800 $ (317,375)
Less: FIT Provision - Current -- --
Tax Effect of NOL Carryforward -- --
------------ ------------
NET EARNINGS FOR THE PERIOD $ 146,800 $ (317,375)
============ ============
EARNINGS PER SHARE * $ .01 $ (.03)
============ ============
DIVIDENDS PER SHARE -0- -0-
============ ============
<FN>
* Earnings per share are based on hare are 10,615,380 weighted shares
outstanding at Aug 31, 1998 and on Aug 31, 1997 10,615,207.
</FN>
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
-6-
A LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED
<TABLE>
<CAPTION>
Aug 31 Aug 31
1998 1997
--------- ---------
Net Cash Flow From Operating Activities:
<S> <C> <C>
Net Income $ 146,800 $(317,375)
Items Reflected in Net Income
Not Requiring Cash:
Depreciation & Amortization 355,043 442,633
--------- ---------
$ 501,843 $ 125,258
Cash Flow Provided From Operations
Accounts Receivable $(661,079) $ 207,164
Inventories 309,000 95,552
Prepaid Expenses $ 35,504 $ (52,009)
Sundry Receivable 127,347 --
Accounts Payable (104,591) (204,991)
Accrued Expenses (20,476) 11,098
--------- ---------
Cash Flow Provided by Operations $ 187,548 $ 182,072
Cash Flow Provided from (used for)
Investment Purposes:
Additions to Fixed Assets $(109,812) $(200,095)
Increase in Other Assets (280,116) 142,441
Marketable Securities (27,623) (27,321)
--------- ---------
Total Cash Flow Provided from $(417,551) $ (84,975)
Investment Purposes
Cash Flow Provided From (used for)
Financing Purposes:
Increase in Long Term Debt (76,775) (594,228)
Capital Contributed -- 150,000
--------- ---------
Cash Flow Used for Financing (76,775) (444,228)
Net Cash Flow $(306,778) $(347,131)
Cash and Cash Equivalents at
Beginning of Period $ 412,353 $ 396,777
--------- ---------
Cash and Cash Equivalents at
End of Period $ 105,575 $ 49,646
========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement and should be read in conjunction herewith.
-7-
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 17 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 nine months
ended Aug 31, 1998 and Aug 31, 1997.
-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,t. 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 equipme nt 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.
08/31/98 08/31/97
-------- --------
Depreciation charged to
Cost of Sales $355,043 $442,633
======== ========
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% of per year of the total library
inventory of complete patterns on sleeves.
NOTE 9. TAX LOSS of CARRYFORWARD
On November 30, l997 the company had a net operating loss of
carryforward of $174,018.
-10-
<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 part - icipate 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 $4,825,972 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 l - ien on
the assets of Harrison Realty and 2nd and 3rd liens on the assets of
Flexo-Craft.
NOTE 12. EARNINGS PER SHARE - 10,615,380 SHARES COMMON STOCK - PAR VALUE
$0.0l - at 8/31/98 and 10,615,207 shares at 8/31/97.
Nine Months ended
08/31/98 08/31/97
-------- --------
Net earnings per share - $ .01 $ (.03)
NOTE 13. ALLOWANCE FOR DOUBTFUL ACCOUNTS
Bad debts are written 08/31/97 off as they occur. An allowance for
doubtful accounts has been established in the amount of 08/31/97
$254,500 or 4% of account 08/31/97 s receivable.
NOTE 14. YEAR 2000 COMPLIANCE
Management has addressed the concerns of 08/31/97 potential year 2000
computing problems, both internally and with external parties, and
08/31/97 believes that significant additional costs will not 08/31/97
be incurred because of this circumstance.
-11-
<PAGE>
MANAGEMENT'S COMPARATIVE DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
AUG 31, 1998 AND AUG 31, 1997
RESULTS OF OPERATIONS
---------------------
REVENUES
For the nine months ended Aug 31, 1998 revenues increased 26% from the prior
year. For the quarter ended Aug 31, 1998 revenues increased 18% from the same
period from the prior year. This increase was primarily the result of increased
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 shipp ed until the next fiscal year.
Management attributes most of the improved performance to the contribution of
the 8 color press which increases the company's capacity and efficiency due to
the significant improvement in printing speeds reached and range of products.
GROSS PROFIT
For the three months ended Aug 31, 1998 gross profit was 29% as compared to 19%
for the same period in the previous year. The improved margins were a direct
result of the contribution of the 8 color press which prints at faster speeds
and uses less labor per yard.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased for the three months
ended Aug 31, 1998 over the same period for the previous year. This was as a
result of the Company's investment in marketing and research and development
costs which will benefit next year.
INTEREST EXPENSE
Interest expense decreased for the first nine months of 1998 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 Aug
31, 1998 t he Company had working capital of $2,002,660. 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
of the duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LASER MASTER INTERNATIONAL, INC.
________________________________
(Registrant)
/s/ MENDEL KLEIN
- ----------------- --------------------------------
Date MENDEL KLEIN, PRESIDENT
/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>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> AUG-01-1998
<CASH> 105,575
<SECURITIES> 490,248
<RECEIVABLES> 0
<ALLOWANCES> 254,500
<INVENTORY> 1,638,440
<CURRENT-ASSETS> 5,162,064
<PP&E> 15,379,224
<DEPRECIATION> 5,913,632
<TOTAL-ASSETS> 15,169,033
<CURRENT-LIABILITIES> 3,159,404
<BONDS> 0
<COMMON> 5,530,566
0
0
<OTHER-SE> 2,245,731
<TOTAL-LIABILITY-AND-EQUITY> 15,169,033
<SALES> 10,584,541
<TOTAL-REVENUES> 10,584,541
<CGS> 7,603,648
<TOTAL-COSTS> 2,554,399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279,694
<INCOME-PRETAX> 146,800
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,800
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
