<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarter Ended September 30, 1995
------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________to___________________
Commission File No.: 0-18114
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LASERMASTER TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Minnesota 41-1612861
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(State or other jurisdiction of incorporation or (IRS Employer
organization) Identification No.)
7156 Shady Oak Road, Eden Prairie, Minnesota 55344
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
(612) 941-8687
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former 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 Exchange 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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at 9/30/95
- ----- ----------------------
Common Stock, $.01 par value 11,245,902
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
---------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
September 30, June 30,
------------- -----------
1995 1995
------------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 230,564 $ 607,223
Accounts receivable, less allowance for
doubtful accounts and sales returns of
$2,012,000 and $2,051,000, respectively 13,844,394 17,104,353
Inventory 20,631,120 21,609,487
Income tax receivable 98,732
Other current assets 2,729,566 2,452,766
Deferred tax asset 2,868,000 2,868,000
----------- -----------
TOTAL CURRENT ASSETS 40,402,376 44,641,829
PROPERTY AND EQUIPMENT, net 6,053,017 6,323,749
CAPITALIZED SOFTWARE, less accumulated
amortization of $4,102,174 and $3,465,724
respectively 5,113,117 4,991,084
ACQUIRED TECHNOLOGY, PATENTS
AND LICENSES, less accumulated amortization
of $1,103,519 and $967,765, respectively 3,392,428 3,204,610
----------- -----------
$54,960,938 $59,161,272
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 4,803,513 $ 6,462,901
Notes payable-related parties 2,965,000
Accounts payable 14,252,719 18,204,869
Accrued payroll and payroll taxes 1,985,168 2,642,947
Income Taxes Payable 201,768
Other current liabilities 2,567,954 2,410,949
Current maturities of long-term debt 1,069,453 1,009,917
----------- -----------
TOTAL CURRENT LIABILITIES 27,643,807 30,933,351
LONG-TERM DEBT, less current maturities 1,448,316 1,598,546
DEFERRED INCOME TAXES 1,336,000 1,336,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized
30,000,000 shares; 11,245,902 and 11,176,382
shares issued and outstanding, respectively 112,459 111,764
Preferred stock, $.01 par value; authorized
5,000,000 shares; no shares issued or
outstanding
Additional paid-in capital 16,786,233 16,626,953
Retained earnings 7,634,123 8,554,658
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 24,532,815 25,293,375
----------- -----------
$54,960,938 $59,161,272
=========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
NET SALES $21,265,871 $30,262,723
COST OF GOODS SOLD 12,727,157 17,085,041
----------- -----------
GROSS PROFIT 8,538,714 13,177,682
OPERATING EXPENSES:
Sales and Marketing 5,401,481 6,616,536
Research and Development 1,296,651 1,286,902
General and Administrative 2,874,061 2,938,043
----------- -----------
9,572,193 10,841,481
----------- -----------
OPERATING (LOSS) PROFIT (1,033,479) 2,336,201
OTHER INCOME (EXPENSE):
Interest expense (340,449) (228,323)
Interest income 4,479 9,193
Other income 54,914 24,368
----------- -----------
(281,056) (194,762)
----------- -----------
(LOSS) EARNINGS BEFORE INCOME TAXES (1,314,535) 2,141,439
INCOME TAX BENEFIT (PROVISION) 394,000 (642,000)
----------- -----------
NET (LOSS) EARNINGS $ (920,535) $ 1,499,439
=========== ===========
PER COMMON SHARE:
Net (Loss) Earnings $ (.08) $ .12
Average common and common
equivalent shares outstanding 12,125,312 12,428,764
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Earnings $ (920,535) $ 1,499,439
Adjustments to reconcile net (loss) earnings to net
cash (used in) provided by operating activities:
Depreciation and amortization 1,400,463 1,442,180
Amortization of deferred financing costs 30,320 20,180
Loss on sale of property and equipment 7,908 189
Change in current assets and current liabilities:
(Increase) decrease in:
Accounts receivable 3,259,959 91,667
Inventory 978,367 (3,604,557)
Other current assets (307,127) (61,465)
Income tax receivable (98,732)
Increase (decrease) in:
Accounts payable (3,952,150) 2,169,837
Accrued payroll and payroll taxes (657,779) (288,509)
Other current liabilities 157,001 188,649
Income taxes payable (201,768) 372,870
----------- -----------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (304,073) 1,830,480
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (376,742) (743,124)
Additions to capitalized software costs (758,483) (906,434)
Proceeds from sale of property and equipment 11,318 1,565
Additions to patents and other assets (323,572) (787,782)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,447,479) (2,435,775)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock 159,975 153,723
Net (repayments) borrowing under revolving credit lines (1,659,388) 39,817
Net borrowing from related parties 2,965,000
Additions to long-term debt 159,003
Payments on long-term debt (249,697) (199,942)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 1,374,893 (6,402)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (376,659) (611,697)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 607,223 2,193,673
----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 230,564 $ 1,581,976
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. Basis of presentation -
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. They do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been no
material change in the information disclosed in the notes to consolidated
financial statements included in the Annual Report on Form 10-K of
LaserMaster Technologies, Inc. and subsidiaries (the "Company") for the year
ended June 30, 1995. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month
period ended September 30, 1995 are not necessarily indicative of the
results that may be expected for the year ending June 30, 1996.
2. Inventory -
Inventory consists of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- -----------
<S> <C> <C>
Raw materials
Purchased printer engines $ 708,509 $ 796,940
Completed subassemblies 5,999,208 5,419,774
Raw materials 8,121,254 9,397,341
Work in process 735,240 987,009
Finished goods 5,066,909 5,008,423
----------- -----------
$20,631,120 $21,609,487
=========== ===========
</TABLE>
3. Short-term financing -
On April 25, 1994 the Company's subsidiary, LaserMaster Corporation (LMC),
established an operating line of credit with a commercial bank which allowed
LMC to borrow up to $5,000,000 of eligible accounts receivable. On November
11, 1994 and December 16, 1994, the agreement was amended to increase the
line of credit from $5,000,000 to $9,250,000 of eligible accounts receivable
and inventory. The amended agreement allows LMC to borrow up to 70% of the
net eligible accounts receivable and 40% of the net eligible inventory
subject to a sublimit of $3,000,000. Borrowing is secured by eligible
accounts receivable and inventory and bears interest at a defined bank
Reference Rate (prime) plus 1.75% (10.50% at September 30, 1995) with a 0.5%
unused line fee. At September 30, 1995 approximately $1,585,000 was unused
under this credit line. The term of the agreement expires April 25, 1996.
The loan agreement requires LMC to meet various covenants involving capital
expenditure limitations, cash flow leverage, quarterly pre-tax profit and
maintain a minimum net worth of $10,250,000. LMC was in violation of the
quarterly pre-tax profit covenant at September 30, 1995.
LaserMaster Europe, Ltd. (LME), a subsidiary of the Company's LaserMaster
Corporation subsidiary, maintains a receivables financing arrangement with a
Dutch commercial finance company whereby LME may borrow up to 70% of its
eligible accounts receivable, with a maximum advance that was increased from
$1,500,000 to $2,500,000 in July 1995. At September 30, 1995 approximately
$593,000 was unused under this credit line. Borrowings are available in U.S.
Dollars and Dutch Guilders. Borrowings in Dutch Guilders are due on demand
and bear interest at the Promissory Note Discount Rate of the Dutch Central
Bank plus 2.5% (6.25% at September 30, 1995). Borrowings in U.S. Dollars are
due on demand and bear
5
<PAGE>
interest at a rate that fluctuates with the market (no U.S. Dollars were
borrowed at September 30, 1995). Other fees include a cash advance
commission of 0.1% per month on the highest monthly loan balance and a
commission equal to 0.1% of all accounts financed, with an annual minimum
charge of $10,000.
During September 1995, LaserMaster Corporation borrowed $1,565,000 under a
demand note from TimeMasters, Inc., a corporation controlled by the
Company's Chief Executive Officer. The note bears interest at a defined bank
Reference Rate (prime) plus 1.75% (10.50% at September 30, 1995). As of
October 11, 1995, an additional $200,000 was added to the existing note
bringing the total amount owed to TMI to $1,765,000 plus accrued interest.
On September 29, 1995, LaserMaster Technologies, Inc. borrowed $1,400,000
from the Company's Chief Executive Officer. As of October 11, 1995,
this amount was repaid in full.
4. Long-term debt -
LaserMaster Corporation maintains the following notes payable to a
commercial finance company, each of which is secured by certain domestic
fixed assets:
<TABLE>
<CAPTION>
September 30, 1995
---------------------------
Interest Rate Balance
-------------- -----------
<S> <C> <C>
Note with monthly payments through
August 1997 of $59,427. 8.53% $1,254,779
Note with monthly payments through
January 1998 of $8,342. (1) 9.87% $ 214,580
Note with monthly payments through
January 1998 of $6,404. (1) 9.87% $ 161,148
Note with monthly payments through
September 1998 of $5,121. (1) 9.87% $ 159,003
</TABLE>
(1) The interest rate is equal to the "One-Month" Commercial Paper rate
plus 4.0%.
5. Supplemental disclosure of cash flow information and non-cash financing
activities -
The Company paid and received cash for the following items:
<TABLE>
<CAPTION>
Three months ended
September 30,
--------------------
1995 1994
-------- --------
<S> <C> <C>
Interest paid $423,831 $208,142
Income tax (received) paid (93,500) 269,130
Interest received 5,362 11,295
</TABLE>
No capital lease obligations were incurred during the three months ended
September 30, 1995. Capital lease obligations of $91,087 were incurred
during the three months ended September 30, 1994.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Net sales for the three months ended September 30, 1995 were $21.3 million
compared to $30.3 million for the same period one year ago. Net loss for the
three months ended September 30, 1995 was $921,000 or $.08 per share compared to
net income of $1.5 million or $.12 per share for the three months ended
September 30, 1994.
The decrease in net sales for the quarter, compared to one year ago, was
primarily attributable to decreases in the sales of plain-paper typesetting and
WinPrint(R)/OEM products. Decreases in the sale of these products are the result
of increased competition and changing market conditions. The Company shipped 245
Big Color(R) DisplayMaker(TM) Professional units and 46 PressMate(TM) units
during the quarter. In August 1995, shipments of PressMate were temporarily
suspended to allow an engineering change to be implemented. This change
addressed registration issues experienced when producing four-color separation
films. In late September 1995, the Company resumed PressMate shipments, and yet
ended the month with a $1.1 million backlog of PressMates and related products.
The Company believes it has resolved the remaining technical issues necessary to
build high-quality PressMate units in volume.
The Company's goal is to maintain and enhance its position as a leading provider
of affordable, high-quality products and consumables to the digital pre-press
and wide-format color printing markets. The Company's strategy is to (1) develop
and produce proprietary print engines, hardware and value-added software, (2)
continue to emphasize domestic telemarketing to targeted professional markets as
a direct sales approach, (3) increase consumable revenue and (4) increase
international sales through a network of Value Added Distributors (VADs).
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's Consolidated
Statements of Operations expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Three months ended
------------------
September 30,
------------------
1995 1994
------ ------
<S> <C> <C>
Net Sales.............................. 100.0% 100.0%
Cost of goods sold..................... 59.9 56.5
----- -----
Gross profit.......................... 40.1 43.5
Expenses:
Sales and marketing................. 25.4 21.8
Research and development............ 6.1 4.3
General and administrative.......... 13.5 9.7
----- -----
Total operating expenses.............. 45.0 35.8
----- -----
Operating (loss) profit................ (4.9) 7.7
Other income (expense):
Interest expense.................... (1.6) (0.7)
Interest income..................... 0.0 0.0
Other............................... 0.3 0.1
----- -----
(Loss) Earnings before income taxes.... (6.2) 7.1
Income tax benefit (provision)......... 1.9 (2.1)
----- -----
Net (Loss) Earnings.................... (4.3)% 5.0%
===== =====
</TABLE>
7
<PAGE>
Net Sales. The following table sets forth net sales by product line expressed
in thousands and as a percentage of net sales:
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------
1995 1994
--------------- ---------------
<S> <C> <C> <C> <C>
Plain-paper typesetting.. $ 8,142 38.3% $16,537 54.6%
PressMate(TM)............ 1,211 5.7 0 0.0
Big Color(R)............. 11,356 53.4 11,623 38.4
WinPrint/OEM/Imaging(R).. 557 2.6 2,103 7.0
------- ----- ------- -----
Total net sales.......... $21,266 100.0% $30,263 100.0%
======= ===== ======= =====
</TABLE>
Net sales of plain-paper typesetters for the three months ended September 30,
1995 decreased 51% from the same period one year ago. The Company believes that
the decrease in plain-paper typesetting sales is primarily attributable to
changing market demands and increased competition. Customers who have
traditionally purchased plain-paper typesetters are more frequently considering
devices which image directly on film. With the introduction of PressMate and
recent general price decreases in the typesetting market, plain-paper
typesetting customers now have reasonably priced options to access entry level
pre-press needs. The Company has experienced increased competition for plain-
paper typesetting sales from several systems integrators who sell at lower
prices. The Company expects revenues from the sale of plain-paper typesetting
products to continue to decline as it shifts its emphasis to the Company's
PressMate chemical-free Filmsetter.
During the three months ended September 30, 1995, the Company shipped 46
PressMate units and $277,000 in related consumables. During August 1995, the
Company temporarily suspended shipments of PressMate units to allow for a
material engineering change. This change addressed registration issues
experienced when creating four-color separations. In late September 1995, the
Company resumed production and shipment of PressMate units, and yet on September
30, 1995 the Company still had a backlog of 47 PressMates and related products
totalling $1.1 million.
Big Color product sales for the three months ended September 30, 1995 included
sales of DisplayMaker Professional units of $2.7 million, ColorMark Pro 1000
color servers of $3.8 million, consumables of $3.3 million, Halon color laser
copier interfaces of $523,000 and miscellaneous of $732,000. For the three
months ended September 30, 1995 and 1994, the Company sold 245 and 297
DisplayMaker units, respectively. During the September 1995 quarter, the Company
initiated marketing for the DisplayMaker Express, its new 54-inch wide high-
speed, inkjet printer. With initial shipments anticipated for December 1995, the
$74,000 DisplayMaker Express will supplement Big Color revenues in future
quarters. The Company currently has prospective orders for more than 50
DisplayMaker Express units which will require confirmation before shipment and
may require one or more quarters to ship. The DisplayMaker Express utilizes a
ColorMark Pro 1000 color print server and an array of LaserMaster proprietary
consumables.
Net sales of WinPrint and OEM software products declined primarily because of
changing markets and decreased sales and marketing expenditures for such
products.
International Sales. The decrease in European and Asian sales is primarily a
result of decreased sales of plain-paper typesetting products. The following
table sets forth international sales by region expressed in thousands and as a
percentage of net sales:
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------
1995 1994
------------- --------------
<S> <C> <C> <C> <C>
Europe...................... $4,014 18.9% $ 5,020 16.6%
Japan, Asia, Pacific........ 2,631 12.4 3,811 12.6
Latin America............... 916 4.3 1,082 3.6
Canada...................... 754 3.5 629 2.0
------ ---- ------- ----
Total international sales... $8,315 39.1% $10,542 34.8%
====== ==== ======= ====
</TABLE>
8
<PAGE>
Gross Profit. The Company's gross profit margin for the three months ended
September 30, 1995 was $8.5 million or 40.1% of net sales compared to $13.2
million or 43.5% of net sales for the same period one year ago. Gross profit for
the three months ended June 30, 1995 was $10.0 million or 33.8% of net sales.
Decreases in gross margin percentage from the first quarter of fiscal 1995 to
the first quarter of fiscal 1996 were primarily a result of increased overhead
expense associated with the commencement of manufacturing proprietary print
engines. The increase in gross profit percentage from the fourth quarter of
fiscal 1995 to the first quarter of fiscal 1996 is primarily attributable to
increases in average prices of plain-paper typesetting and Big Color products,
decreases in overhead costs and a more favorable sales mix of high versus low
margin products.
Expenses. Sales and marketing expense for the three months ended September
30, 1995 decreased $1.2 million to $5.4 million, compared to $6.6 million for
the same period one year ago. The reduction in sales and marketing expense
included decreases in sales related expenses of $359,000 and decreases in
marketing related expenses of $866,000.
Research and development expenditures, including amounts expensed and
capitalized, were $2.1 million in the three months ended September 30, 1995,
compared to $2.2 million for the same period one year ago. Research and
development expenditures capitalized for the three months ended September 30,
1995 were $758,000 compared to $906,000 for the three months ended September 30,
1994.
General and administrative expense for the three months ended September 30, 1995
and 1994 was $2.9 million.
Interest expense was $340,000 and $228,000 for the three months ended September
30, 1995 and 1994, respectively. Average debt levels and interest rates have
increased slightly for the first quarter of fiscal 1996 compared to the same
period one year ago.
The Company's effective income tax rate for the three months ended September 30,
1995 and 1994 was 30%.
Foreign Currency. The Company purchases certain raw materials, primarily from
Japan, which are subject to currency fluctuations. It also sells finished
goods, extends credit, and maintains accounts receivable and payable in five
major European denominations. The impact of currency fluctuations on these
activities to date is immaterial to the financial statements taken as a whole.
The Company has some contractual protection against currency fluctuations
(primarily the Japanese yen) with regard to purchases of raw printer engines and
memory. The Company does not consider its exposure with regard to European
currencies to be material and has not entered into any substantial currency
hedging transactions as they relate to those currencies.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the three months ended September
30, 1995 was $304,000 compared to net cash provided by operating activities of
$1.8 million for the same period one year ago. The Company's cash-flow was
affected by a net loss for the September 1995 quarter of $921,000 compared to
net earnings of $1.5 million for the September 1994 quarter. The Company
decreased inventory by $978,000 during the three months ended September 30, 1995
compared to increasing inventory by $3.6 million for the same period one year
ago. Accounts receivable decreased $3.3 million during the September 1995
quarter compared to a decrease of $92,000 for the September 1994 quarter.
Accounts payable decreased $4.0 million for the three months ended September 30,
1995 compared to increasing $2.2 million for the same period one year ago.
Net cash used in investing activities was $1.4 million for the three months
ended September 30, 1995 compared to $2.4 million for the same period one year
ago. Investment in capital equipment was $377,000 for the September 1995
quarter compared to $743,000 for the September 1994 quarter. Investment in
intellectual property was $324,000 for the three months ended September 30, 1995
compared to $788,000 during the same period one year ago.
The Company maintains a credit facility with a commercial bank which allows for
borrowing of up to $9.25 million of eligible accounts receivable and inventory.
The agreement allows LMC, the Company's primary operating subsidiary, to borrow
up to 70% of the net eligible accounts receivable and 40% of the net eligible
9
<PAGE>
inventory subject to a sublimit of $3.0 million. The loan agreement requires
LMC to meet various covenants involving capital expenditure limitations, cash
flow leverage, quarterly pre-tax profit and maintenance of a minimum net worth
of $10.25 million. LMC failed to meet the quarterly pre-tax profit covenant
for the September 1995 quarter and has been notified by the bank that LMC is in
technical default under the terms of the credit agreement. The bank has taken
no action to demand or accelerate repayment of the amounts owed under the
existing facility. LME maintains a receivable financing arrangement with a
Dutch commercial finance company providing up to $2.5 million of eligible net
receivables.
During September 1995, LMC's cash needs exceeded available cash. To cover
short-term cash needs, LMC borrowed $1.565 million under a demand note from
TimeMasters, Inc. (TMI), a corporation controlled by Mr. Mel Masters, the
Company's Chief Executive Officer, with the understanding that the demand note
be replaced with a term note and consideration in the form of a warrant. The
demand note bears interest on substantially the same terms as proposed by LMC's
current lender. The number of warrants would be the principal amount of the
note divided by the exercise price of $6.35. The exercise price was determined
by the net sales price of the Company's shares on the date that the commitment
to the loan was made. In October 1995, an additional $200,000 was added to the
existing demand note bringing the total amount owed to TMI to $1.765 million
plus accrued interest as of the date of this filing.
In September 1995 the Company borrowed $1.4 million from Mr. Masters which was
repaid in full as of October 11, 1995.
On September 26, 1995, LMC received a proposal for financing of accounts
receivable and inventory from a commercial finance company that would both
replace the current facility with the commercial bank and provide additional
working capital. The lender has indicated that it intends to go forward with
the transition and that it will be submitting loan documentation to the Company
within the next week to ten days. Although negotiations with such finance
company are proceeding constructively, there can be no assurances that such
negotiations will be successfully completed. If such facilities prove
unavailable, LMC may borrow additional funds from TMI, other affiliated parties
or unrelated parties.
The Company's business plan is contingent on continuing to obtain reasonably
priced sources of capital and sales remaining uninterrupted. If sales are less
than expected or sources of financing are unavailable, the Company will be
required to revise its business plans. The Company does not believe that
inflation will have a material effect on the results from operations or its
financial condition in fiscal 1996.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On October 16, 1995, the Company became aware that John D. Becker, a
shareholder, had filed an action in the United States District Court for the
District of Minnesota, Fourth Division and that Becker proposes to represent a
class of similarly situated shareholders. The suit names as defendants the
Company, Melvin L. Masters, Ralph D. Rolen, Robert J. Wenzel, and Lawrence J.
Lukis. The individual defendants are officers or directors of the Company. The
action alleges violations of the Securities Exchange Act of 1934. The amount of
damages prayed for has not been specified. While the Company believes there is
no truth to the allegations, the Company will accrue legal costs related to the
action.
On October 24, 1995, LaserMaster Corporation filed an action in the United
States District Court for the District of Minnesota, Fourth Division, against
Sentinel Imaging, a division of Sentinel Business Systems, Inc. The complaint
alleges, among other things, patent infringement, trademark infringement, Lanham
Act violations, misappropriation of trade secrets, and interference with
contractual relationships. This action is related to LaserMaster's Big Color
product line generally and, in particular, LaserMaster's Big Ink(TM) delivery
system and ColorMark(TM) color management system.
ITEM 2: CHANGES IN SECURITIES
Nothing to report.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
For the quarter ended September 30, 1995, the Company's subsidiary, LaserMaster
Corporation, failed to meet the quarterly pre-tax profit covenant required by
its credit agreement with a commercial bank. LMC has made all payments required
by that credit agreement. LMC has been notified by the bank that it is in
technical default under the terms of the credit agreement. The bank has taken
no action to demand or accelerate repayment of the amounts owed under the
existing facility. LMC continues to operate under the terms of the existing
credit agreement while it negotiates a new credit facility with a commercial
finance company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Nothing to report.
ITEM 5: OTHER INFORMATION
Nothing to report.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits
-------------------
None.
(b) Reports on Form 8-K
-------------------
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LASERMASTER TECHNOLOGIES, INC.
/s/Melvin L. Masters
- --------------------
Melvin L. Masters
Chief Executive Officer
/s/Randall L. Ruegg
- -------------------
Randall L. Ruegg
Chief Financial Officer
Dated: November 14, 1995
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
September 30, 1995 10Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 230,564
<SECURITIES> 0
<RECEIVABLES> 13,844,394
<ALLOWANCES> 2,012,000
<INVENTORY> 20,631,120
<CURRENT-ASSETS> 40,402,376
<PP&E> 6,053,017
<DEPRECIATION> 12,767,510
<TOTAL-ASSETS> 54,960,938
<CURRENT-LIABILITIES> 27,643,807
<BONDS> 0
<COMMON> 112,459
0
0
<OTHER-SE> 24,420,356
<TOTAL-LIABILITY-AND-EQUITY> 54,960,938
<SALES> 21,265,871
<TOTAL-REVENUES> 21,265,871
<CGS> 12,727,157
<TOTAL-COSTS> 12,727,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 340,449
<INCOME-PRETAX> (1,314,535)
<INCOME-TAX> 394,000
<INCOME-CONTINUING> (920,535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (920,535)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
