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, 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
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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)
(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 - May 31, 1999 3
Condensed Consolidated Statements of Operations for
the Three Months Ended May 31, 1999 and May 31, 1998 5
Condensed Consolidated Statements of Operations for
the Six Months Ended May 31, 1999 and May 31, 1998 6
Condensed Consolidated Statements for Cash Flows for
the Six Months Ended May 31, 1999 and May 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
MAY 31,
1999
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CURRENT ASSETS:
<S> <C>
Cash in Banks $ 142,170
Marketable Securities 502,696
Accounts Receivable - Net 2,373,883
Merchandise Inventory 1,817,356
Prepaid Expenses 42,250
Notes Receivable 107,761
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TOTAL CURRENT ASSETS $ 4,986,116
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FIXED ASSETS:
Factory Building & Improvements $ 5,241,098
Land - Factory Site 215,000
Machinery & Equipment 8,675,848
Engraving Inventory 878,456
Installation Cost 968,083
Furniture & Fixtures 134,849
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TOTAL $16,113,334
Less: Accum. Depreciation 6,334,176
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TOTAL FIXED ASSETS $ 9,779,158
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OTHER ASSETS:
Deferred Charges $ 89,480
Restricted Cash 456,187
Loans Receivable 323,282
CSU-Life Insurance 93,656
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TOTAL OTHER ASSETS $ 962,605
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TOTAL ASSETS $15,727,879
===========
</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
MAY 31,
1999
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CURRENT LIABILITIES:
<S> <C>
Accounts Payable $ 519,643
Accrued Expenses & Taxes 91,695
Current Portion of Long Term Debt 628,711
Loan - Merrill Lynch 1,878,633
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TOTAL CURRENT LIABILITIES $ 3,118,682
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LONG TERM LIABILITIES:
Non-Current Portion of Long Term
Debt $ 4,292,637
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TOTAL LONG TERM LIABILITIES $ 4,292,637
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TOTAL LIABILITIES $ 7,411,319
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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 5/31/98 Paid in Capital 5,424,412
Unrealized Gain 4,844
Retained Earnings 2,781,150
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TOTAL STOCKHOLDERS' EQUITY $ 8,316,560
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TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $15,727,879
===========
</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>
MAY 31, MAY 31,
1999 1998
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<S> <C> <C>
REVENUES $ 3,683,560 $ 3,321,955
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Depreciation Expense $ 129,661 $ 113,626
Cost of Sales 2,833,626 2,141,129
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TOTAL COST OF SALES $ 2,963,287 $ 2,254,755
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GROSS PROFIT $ 720,273 $ 1,067,200
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OPERATING EXPENSES:
Selling Expenses $ 257,131 $ 448,654
General & Administrative Expenses 302,136 469,463
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TOTAL OPERATING EXPENSES $ 559,267 $ 918,117
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NET EARNINGS - OPERATIONS $ 161,006 $ 149,083
Interest Expense 61,177 98,877
Interest & Dividend Income (3,216) (19,769)
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NET EARNINGS BEFORE FIT $ 103,045 $ 69,975
Less: FIT Provision - Current - -
Tax Effect of NOL Carryforward - -
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NET EARNINGS FOR THE PERIOD $ 103,045 $ 69,975
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EARNINGS PER SHARE * $ .01 $ .01
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DIVIDENDS PER SHARE -0- -0-
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<FN>
* Earnings per share are based on 10,615,380 shares outstanding at May 31, 1999
and on May 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 INCOME
FOR THE SIX MONTHS ENDED
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1999 1998
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<S> <C> <C>
REVENUES $ 6,869,131 $ 6,465,070
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Depreciation Expense $ 258,846 $ 236,695
Cost of Sales 5,093,614 4,438,259
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TOTAL COST OF SALES $ 5,352,460 $ 4,674,954
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GROSS PROFIT $ 1,516,671 $ 1,790,116
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OPERATING EXPENSES:
Selling Expenses $ 593,543 $ 778,605
General & Administrative Expenses 652,690 789,568
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TOTAL OPERATING EXPENSES $ 1,246,233 $ 1,568,173
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NET EARNINGS - OPERATIONS 270,438 221,943
Interest Expense 153,791 210,324
Interest & Dividend Income (12,134) (22,738)
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NET EARNINGS BEFORE FIT $ 128,781 $ 34,357
Less: FIT Provision - Current - -
Tax Effect of NOL Carryforward - -
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NET EARNINGS FOR THE PERIOD $ 128,781 $ 34,357
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EARNINGS PER SHARE * .01 (.00)
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DIVIDENDS PER SHARE -0- -0-
=========== ===========
<FN>
* Earnings per share are based on 10,615,380 shares outstanding at May 31, 1999
and on May 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
SIX MONTHS ENDED
<TABLE>
<CAPTION>
MAY 31 MAY 31
1999 1998
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Net Cash Flow From Operating
Activities:
<S> <C> <C>
Net Income $ 128,781 $ 34,357
Items Reflected in Net Income
Not Requiring Cash:
Depreciation & Amortization 258,846 241,241
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$ 387,627 $ 275,598
Cash Flow Provided From Operations
Accounts Receivable $ 1,113,554 $ (236,801)
Inventories 235,000 (100,144)
Prepaid Expenses 33,256 (683)
Accounts Payable (837,797) (245,385)
Accrued Expenses 4,266 (96,428)
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Cash Flow Provided by Operations $ 935,906 $ (403,843)
Cash Flow Provided from (used for)
Investment Purposes:
Additions to Fixed Assets $ (364,402) $ (218,282)
Increase in Other Assets (315,030) (439,177)
Marketable Securities (26,611) (21,481)
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Total Cash Flow Provided from $ (706,043) $ (478,940)
Investment Purposes
Cash Flow Provided From (used for)
Financing Purposes:
Payment of Debt (326,909) (23,334)
Capital Contributed - 748,110
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Cash Flow Used for Financing $ (326,909) $ 724,776
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Net Cash Flow $ (97,046) $ (358,007)
Cash and Cash Equivalents at
Beginning of Period 239,216 412,353
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Cash and Cash Equivalents at
End of Period $ 142,170 $ 54,346
=========== ===========
</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 20 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, 1999 and May 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.
05/31/99 05/31/98
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Depreciation charged to
Cost of Sales $258,846 $236,695
======== ========
The annual depreciation rates used are as follows:
Building and Improvements 3%
Machinery and Equipment 10% - 14.3%
Furniture and Fixtures 10%
<PAGE>
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.
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
5/31/99 and 10,615,380 shares at 5/31/98.
Six Months ended
05/31/99 05/31/98
-------- --------
Net earnings per share - $ .01 $ .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 $304,500 or 10% of
accounts receivable.
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<PAGE>
MANAGEMENT'S COMPARATIVE DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED
MAY 31, 1999 AND MAY 31, 1998
RESULTS OF OPERATIONS
---------------------
REVENUES
For the six months ended May 31, 1999 revenues increased 6% from the prior year.
For the quarter ended May 31, 1999 revenues increased 11% 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. The 8 color
press is working properly and has allowed the company to triple its capacity and
to open new markets due to the expanded printing capabilities.
GROSS PROFIT
For the three months ended May 31, 1999 gross profit was 20% as compared to 32%
for the same period in the previous year. The decrease in gross profit was due
to the fact that the company printed many new designs for existing and new
customers which will be used in mass production later this year and for next
year. In printing new designs there is an initial learning curve which results
in start up costs. Management is confident gross profit percentages will improve
after these initial start up costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased 21% for the three months
ended May 31, 1999 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 and because of the increased sales volume.
INTEREST EXPENSE
Interest expense decreased for the first six 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 May
31, 1999 the Company had working capital of $1,867,434. 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)
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Date MENDEL KLEIN, PRESIDENT
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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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