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 29, 2000 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 - 10,520,880 shares - each share $0.01 par value.
1
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LASER MASTER INTERNATIONAL INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Consolidated Balance Sheets - February 29, 2000 3-4
Consolidated Statements of Operations for the
Three Months Ended February 29, 2000 and February 28, 1999 5
Consolidated Statements of Cash Flows for the
Three Months Ended February 29, 2000 and February 28, 1998 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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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
FEBRUARY 29,
2000
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CURRENT ASSETS:
<S> <C>
Cash in Banks $ 308,511
Marketable Securities 496,242
Accounts Receivable - Net 2,653,370
Merchandise Inventory 1,997,072
Prepaid Expenses 30,457
Escrow Account 339,940
Notes Receivable 103,511
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TOTAL CURRENT ASSETS $ 5,929,103
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FIXED ASSETS:
Factory Building & Improvements $ 5,481,288
Land - Factory Site 215,000
Machinery & Equipment 9,179,732
Engraving Inventory 878,454
Installation Cost 953,524
Furniture & Fixtures 153,657
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TOTAL $16,861,655
Less: Accum. Depreciation 6,789,181
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TOTAL FIXED ASSETS $10,072,474
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OTHER ASSETS:
Deferred Charges $ 83,520
Mutual Funds 38,542
Notes Receivable 279,659
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TOTAL OTHER ASSETS $ 401,721
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TOTAL ASSETS $16,403,298
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</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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<TABLE>
<CAPTION>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES
FEBRUARY 29,
2000
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CURRENT LIABILITIES:
<S> <C>
Accounts Payable $ 1,078,208
Accrued Expenses & Taxes 62,337
Current Portion of Long Term Debt 767,834
Loan - Merrill Lynch 1,642,292
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TOTAL CURRENT LIABILITIES $ 3,550,671
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LONG TERM LIABILITIES:
Non-Current Portion of Long Term
Debt $ 3,950,202
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TOTAL LONG TERM LIABILITIES $ 3,950,202
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TOTAL LIABILITIES $ 7,500,873
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STOCKHOLDERS' EQUITY:
Capital Stock - Authorized
50,000,000 Shares at 1c Par Value
Issued and Outstanding 10,520,880
Shares at 2/28/00 $ 105,209
Capital in Excess Par 5,424,412
Unrealized Gain on Securities (30,977)
Retained Earnings 3,452,839
Treasury Stock (49,058)
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TOTAL STOCKHOLDERS' EQUITY $ 8,902,425
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TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $16,403,298
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</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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<TABLE>
<CAPTION>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
FEBRUARY 29, FEBRUARY 28,
2000 1999
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REVENUES
<S> <C> <C>
$ 3,136,051 $ 3,185,571
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Depreciation Expense $ 129,423 $ 129,185
Cost of Sales 2,256,594 2,259,988
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TOTAL COST OF SALES 2,386,017 2,389,173
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GROSS PROFIT 750,034 796,398
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OPERATING EXPENSES:
Selling Expenses $ 328,762 $ 336,412
General & Administrative Expenses 331,039 350,554
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TOTAL OPERATING EXPENSES $ 659,801 $ 686,966
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OPERATING PROFIT $ 90,233 $ 109,432
Interest & Finance Charges $ 85,035 $ 92,614
Interest & Capital Gains (18,503) (8,918)
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NET EARNINGS - BEFORE FIT $ 23,701 $ 25,736
Less: FIT Provision - Current - -
Tax Effect of NOL Carryforward - -
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NET EARNINGS FOR THE PERIOD $ -0- $ 25,736
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EARNINGS PER SHARE * $ .00 $ .00
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DIVIDENDS PER SHARE -0- -0-
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<FN>
* Earnings per share are based on 10,520,880 shares outstanding at February 29,
2000 and 10,615,380 February 28, 1999.
</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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<TABLE>
<CAPTION>
LASER MASTER INTERNATIONAL, INC.
AND WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
FEBRUARY 29 FEBRUARY 28,
2000 1999
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Net Cash Flow From Operating
Activities:
<S> <C> <C>
Net Income $ 23,701 $ 25,736
Items Reflected in Net Income
Not Requiring Cash:
Depreciation & Amortization 129,423 129,185
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$ 153,124 $ 154,921
Cash Flow Provided From Operations
Accounts Receivable $ 512,909 $ 446,613
Inventories (482,000) 33,706
Prepaid Expenses 38,088 5,470
Loans Receivable - -
Accounts Payable (179,242) (415,241)
Accrued Expenses 6,564 (11,289)
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Cash Flow Provided by Operations $ 49,443 $ 214,180
Cash Flow Provided from (used for)
Investment Purposes:
Additions to Fixed Assets $ (83,092) $ -
Increase in Other Assets 92,284 (38,034)
Marketable Securities (145,566) 6,817
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Total Cash Flow Provided from
Investment Purposes $ (136,374) $ (31,217)
Cash Flow Provided From (used for)
Financing Purposes:
Repayment in Long Term Debt (173,032) (270,626)
Capital Contributed (50,003) -
Increase in Bank Loan - -
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Total Cash Flow From Financing $ (223,035) $ (270,626)
Net Cash Flow $ (309,966) $ (87,663)
Cash and Cash Equivalents at
Beginning of Period 618,477 239,216
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Cash and Cash Equivalents at
End of Period $ 308,511 $ 151,553
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</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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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 FIRST 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 29, 2000 and February 28, 1999.
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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. A
(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 First
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.
02/29/00 02/28/99
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Depreciation charged to
Cost of Sales $129,423 $123,185
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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 CREDIT CARRYFORWARD
On November 30, l999 the company had a tax credit carryforward of
$83,787.
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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 $4,184,860 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 - 10,520,880 SHARES COMMON STOCK - PAR VALUE $0.0l
at 2/29/00 and 10,615,380 shares at 2/28/99.
Fiscal years ended
02/29/00 02/28/99
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Net earnings per share - $ .00 $ .00
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<PAGE>
MANAGEMENT'S COMPARATIVE DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
RESULTS OF OPERATIONS
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REVENUES
For the three months ended February 29, 2000 revenues decreased 1% from the
prior year. The revenue decrease was due to the fact the company spent much
factory time running samples for potential new customers for their new packaging
products. If these sample runs are successful this would result in increased
orders for the second half of the year.
GROSS PROFIT
For the three months ended February 29, 2000 gross profit was 24% as compared to
24% for the same period in the previous year. The company operated more
efficiently due to faster press speeds but this was offset by higher raw
material prices.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased 2% for the three months
ended February 29, 2000 over the same period for the previous year. This was as
a result of the Company's cost control measures.
INTEREST EXPENSE
Interest expense decreased for the first three months of 2000 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 29, 2000 the Company had working capital of $2,378,432. 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)
4/13/00 /s/ Mendel Klein
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Date MENDEL KLEIN, PRESIDENT
4/13/00 /s/ Leah 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.
