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, 1999 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)
(973) 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 - 10,615,380 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, 1999 3
Condensed Consolidated Statements of Operations for
the Three Months Ended Aug 31, 1999 and Aug 31, 1998 5
Condensed Consolidated Statements of Operations for
the Nine Months Ended Aug 31, 1999 and Aug 31, 1998 6
Condensed Consolidated Statements for Cash Flows for
the Nine Months Ended Aug 31, 1999 and Aug 31, 1998 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,
1999
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CURRENT ASSETS:
<S> <C>
Cash in Banks $ 69,070
Marketable Securities 497,946
Accounts Receivable - Net 3,130,822
Merchandise Inventory 1,567,356
Prepaid Expenses 22,250
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TOTAL CURRENT ASSETS $ 5,287,444
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FIXED ASSETS:
Factory Building & Improvements $ 5,309,698
Land - Factory Site 215,000
Machinery & Equipment 8,652,777
Engraving Inventory 878,456
Installation Cost 968,083
Furniture & Fixtures 134,849
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TOTAL $16,158,863
Less: Accum. Depreciation 6,463,599
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TOTAL FIXED ASSETS $ 9,695,264
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OTHER ASSETS:
Deferred Charges $ 69,570
Escrow Acct. - EDA 69,937
Loans Receivable 451,977
CSV - Insurance 93,656
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TOTAL OTHER ASSETS $ 685,140
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TOTAL ASSETS $15,667,848
===========
</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>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES
AUG 31,
1999
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CURRENT LIABILITIES:
<S> <C>
Accounts Payable $ 1,337,334
Accrued Expenses & Taxes 204,627
Current Portion of Long Term Debt 543,335
Loan - Merrill Lynch 1,365,373
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TOTAL CURRENT LIABILITIES $ 3,450,669
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LONG TERM LIABILITIES:
Non-Current Portion of Long Term
Debt $ 3,718,332
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TOTAL LONG TERM LIABILITIES $ 3,718,332
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TOTAL LIABILITIES $ 7,169,001
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STOCKHOLDERS' EQUITY:
Capital Stock - Authorized
50,000,000 Shares at 1c Par Value
Issued and Outstanding 10,615,380 $ 106,154
Shares at 8/31/99 Paid in Capital 5,424,412
Unrealized Gain 543
Retained Earnings 2,967,738
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TOTAL STOCKHOLDERS' EQUITY $ 8,498,847
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TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $15,667,848
===========
</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>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
Aug 31, Aug 31,
1999 1998
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<S> <C> <C>
REVENUES $ 4,220,214 $ 4,119,471
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Depreciation Expense $ 129,423 $ 118,348
Cost of Sales 2,888,354 2,810,346
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TOTAL COST OF SALES $ 3,017,777 $ 2,928,694
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GROSS PROFIT $ 1,202,437 $ 1,190,777
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OPERATING EXPENSES:
Selling Expenses $ 361,056 $ 387,598
General & Administrative Expenses 514,799 598,628
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TOTAL OPERATING EXPENSES $ 875,855 $ 986,226
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OPERATING PROFIT $ 326,582 $ 204,551
Interest & Finance Charges 148,027 100,686
Interest & Dividend Income (8,033) (8,578)
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NET EARNINGS BEFORE FIT $ 186,588 $ 112,443
Less: FIT Provision - Current -- --
Tax Effect of NOL Carryforward -- --
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NET EARNINGS FOR THE PERIOD $ 186,588 $ 112,443
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EARNINGS PER SHARE * $ .02 $ .01
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DIVIDENDS PER SHARE -0- -0-
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<FN>
* Earnings per share are based on 10,615,380 weighted shares outstanding at
8/31/99 & 10,615,380 shares outstanding at 8/31/98.
</FN>
</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>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED
<TABLE>
<CAPTION>
Aug 31, Aug 31,
1999 1998
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<S> <C> <C>
REVENUES $ 11,089,345 $ 10,584,541
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Depreciation Expense $ 388,269 $ 355,043
Cost of Sales 7,981,968 7,248,605
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TOTAL COST OF SALES $ 8,370,237 $ 7,603,648
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GROSS PROFIT $ 2,719,108 $ 2,980,893
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OPERATING EXPENSES:
Selling Expenses $ 954,599 $ 1,166,203
General & Administrative Expenses 1,167,489 1,388,196
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TOTAL OPERATING EXPENSES $ 2,122,088 $ 2,554,399
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OPERATING PROFIT $ 597,020 $ 426,494
Interest & Finance Charges 301,818 311,010
Interest & Dividend Income (20,167) (31,316)
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NET EARNINGS BEFORE FIT 315,369 $ 146,800
Less: FIT Provision - Current -- --
Tax Effect of NOL Carryforward -- --
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NET EARNINGS FOR THE PERIOD $ 315,369 $ 146,800
============ ============
EARNINGS PER SHARE * $ .03 $ .01
============ ============
DIVIDENDS PER SHARE -0- -0-
============ ============
<FN>
* Earnings per share are based on 10,615,380 weighted shares outstanding at Aug
31, 1999 and on Aug 31, 1998 10,615,380.
</FN>
</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>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED
<TABLE>
<CAPTION>
Aug 31 Aug 31
1999 1998
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Net Cash Flow From Operating
Activities:
<S> <C> <C>
Net Income $ 315,369 $ 146,800
Items Reflected in Net Income
Not Requiring Cash:
Depreciation & Amortization 388,269 355,043
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$ 703,638 $ 501,843
Cash Flow Provided From Operations
Accounts Receivable $ 356,615 $ (661,079)
Inventories 485,000 309,000
Prepaid Expenses 53,256 35,504
Sundry Receivable 107,761 127,347
Accounts Payable (20,106) (104,591)
Accrued Expenses 117,198 (20,476)
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Cash Flow Provided by Operations $ 1,803,362 $ 187,548
Cash Flow Provided from (used for)
Investment Purposes:
Additions to Fixed Assets $ (409,931) $ (109,812)
Increase in Other Assets (81,931) (280,116)
Marketable Securities (21,861) (27,623)
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Total Cash Flow Provided from $ (513,723) $ (417,551)
Investment Purposes
Cash Flow Provided From (used for)
Financing Purposes:
Increase in Long Term Debt (1,459,785) (76,775)
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Cash Flow Used for Financing (1,459,785) (76,775)
Net Cash Flow $ (170,146) $ (306,778)
Cash and Cash Equivalents at
Beginning of Period 239,216 412,353
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Cash and Cash Equivalents at
End of Period
$ 69,070 $ 105,575
=========== ===========
</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>
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, 1999 and Aug 31, 1998.
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<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.
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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.
08/31/99 08/31/98
-------- --------
Depreciation charged to
Cost of Sales $388,269 $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% per year of the total library
inventory of complete patterns on sleeves.
NOTE 9. TAX LOSS CARRYFORWARD
On November 30, l998 the company had a net operating loss carryforward
of $227,460.
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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 $125,000
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 $125,000. 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 $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 lien on the
assets of Harrison Realty and 2nd and 3rd liens on the assets of
Flexo-Craft.
NOTE 12. EARNINGS PER SHARE - 10,615,380 SHARES COMMON STOCK PAR VALUE $0.0l at
8/31/99 and 10,615,380 shares at 8/31/98.
Nine Months ended
08/31/99 08/31/98
-------- --------
Net earnings per share - $ .03 $ .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 $404,500 or 13% of
accounts receivable.
NOTE 14. YEAR 2000 COMPLIANCE
Management has addressed the concerns of potential year 2000 computing
problems, both internally and with external parties, and believes that
significant additional costs will not be incurred because of this
circumstance.
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<PAGE>
MANAGEMENT'S COMPARATIVE DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
AUG 31, 1999 AND AUG 31, 1998
RESULTS OF OPERATIONS
---------------------
REVENUES
For the nine months ended Aug 31, 1999 revenues increased 5% from the prior
year. For the quarter ended Aug 31, 1999 revenues increased 2% 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 shipped 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, 1999 gross profit was 28% as compared to 28%
for the same period in the previous year. The same margins were a direct result
of a reduction in certain inventory items at lower prices.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased for the three months
ended Aug 31, 1999 over the same period for the previous year. This was as a
result of the Company's investment in advanced computer software and hardware
plus cost controls on salesman.
INTEREST EXPENSE
Interest expense decreased for the first nine months of 1999 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, 1999 the Company had working capital of $1,836,775. 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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<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
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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)
October 14, 1999 /s/ Mendel Klein
----------------- --------------------------------
Date MENDEL KLEIN, PRESIDENT
October 14, 1999 /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.
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000700892
<NAME> LASER MASTER INTERNATIONAL INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1998
<PERIOD-END> AUG-31-1999
<CASH> 69070
<SECURITIES> 497946
<RECEIVABLES> 3535322
<ALLOWANCES> 404500
<INVENTORY> 1567356
<CURRENT-ASSETS> 5287444
<PP&E> 16158863
<DEPRECIATION> 6463599
<TOTAL-ASSETS> 15667848
<CURRENT-LIABILITIES> 3450669
<BONDS> 0
0
0
<COMMON> 106154
<OTHER-SE> 5424412
<TOTAL-LIABILITY-AND-EQUITY> 15667848
<SALES> 4220214
<TOTAL-REVENUES> 4220214
<CGS> 3017777
<TOTAL-COSTS> 3017777
<OTHER-EXPENSES> 875855
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<INTEREST-EXPENSE> 148027
<INCOME-PRETAX> 186588
<INCOME-TAX> 0
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<EPS-DILUTED> .02
</TABLE>
