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EX-31.1 - LASER MASTER INTERNATIONAL INCc59075_ex31-1.htm
EX-32.1 - LASER MASTER INTERNATIONAL INCc59075_ex32-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2009

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ________________ to ______________________

Commission File Number 2-76262-NY

LASER MASTER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

 

 

New York

11-2564587

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

 

 

1000 First Street, Harrison, NJ

07029

(Address of principal executive offices)

(Zip Code)

(973) 482-7200
(Registrant’s telephone number, including area code)

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 past 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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

Large accelerated filer

Accelerated filer

Non-accelerated filer o

Smaller reporting company

o

o

 

x

 

 

 

 

(Do not check if a smaller reporting

 

 

company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

As of October 20, 2009, 10,840,380 shares of the Registrant’s Common Stock, par value $0.01, were outstanding.

 


Table of Contents

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

11

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

14

Item 4.

 

Controls And Procedures

 

14

 

 

 

 

 

PART II. OTHER INFORMATION

 

  

 

 

 

Item 1.

 

Legal Proceedings

 

15

Item 1A.

 

Risk Factors

 

15

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

15

Item 3.

 

Defaults Upon Senior Securities

 

15

Item 4.

 

Submission of Matters to a Vote of Security Holders

 

15

Item 5.

 

Other Information

 

15

Item 6.

 

Exhibits

 

15

 

 

 

SIGNATURES

 

16

 

 

 

CERTIFICATES

 

 

 

 

 

Ex - 31.1: Certification

 

 

Ex - 32.1: Certification

 

 

2


PART I

Laser Master International, Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)

 

 

 

 

 

 

 

 

 

 

August 31, 2009

 

November 30, 2008

 

 

ASSETS:

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

179,434

 

$

266,992

 

Accounts receivables, net of allowance for doubtful accounts of $412,623 and $ 504,816 as of August 2009 and November 30, 2008, respectively

 

$

778,522

 

$

2,012,427

 

Inventories

 

$

2,170,598

 

$

1,461,151

 

Short-term investments, available for sale

 

$

25,657

 

$

21,544

 

Prepaid expenses and other current assets

 

$

1,008,112

 

$

1,057,768

 

 

 







Total Current Assets

 

$

4,162,323

 

$

4,819,882

 

Property and equipment - net

 

$

9,049,223

 

$

9,206,472

 

Investment

 

$

2,007,903

 

$

1,980,570

 

Other Assets

 

$

24,451

 

$

24,880

 

 

 







TOTAL ASSETS

 

$

  15,243,900

       

$

  16,031,804

 

 

 







LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts Payable & Accrued Liabilities

 

 

 

 

 

 

 

Accounts payable

 

$

916,347

 

$

985,190

 

Accrued expenses

 

$

69,796

 

$

105,652

 

State income tax payable

 

$

62,823

 

$

62,823

 

Short-term debt – related party

 

$

526,304

 

$

 

Current maturities of long-term debt

 

$

176,425

 

$

168,635

 

 

 







Total Current Liabilities

 

$

1,751,695

 

$

1,322,300

 

Long-term debt - net of current portion

 

$

6,094,671

 

$

6,217,352

 

Deferred Income

 

$

227,342

 

$

130,254

 

 

 







TOTAL LIABILITIES

 

$

8,073,708

 

$

7,669,906

 

Stockholders’ Equity

 

 

 

 

 

 

 

Common stock, $0.01 par value, 50,000,000 shares authorized; 10,840,380 shares issued and outstanding

 

$

108,404

 

$

108,404

 

Additional paid-in capital

 

$

5,162,638

 

$

5,162,638

 

Retained earnings

 

$

1,909,558

 

$

3,105,377

 

Accumulated other comprehensive income

 

$

(10,408

)

$

(14,521

)

 

 







Total Stockholders’ Equity

 

$

7,170,192

 

$

8,361,898

 

 

 







TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

15,243,900

 

$

16,031,804

 









The accompanying notes are an integral part of these unaudited consolidated financial statements

3


Laser Master International, Inc.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months period ended

 

For the Nine Months period ended

 

 

 

August 31 2009

 

August 31 2008

 

August 31 2009

 

August 31 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues, Net

 

$

  2,154,079

 

$

  3,819,612

 

$

  5,375,093

 

$

  11,380,295

 

Rental Income

 

$

121,500

 

$

126,225

 

$

364,500

 

$

374,475

 

 

 













Total Revenue

 

$

2,275,579

 

$

3,945,837

 

$

5,739,593

 

$

11,754,770

 

Cost of Revenue

 

$

1,517,895

 

$

2,935,029

 

$

4,095,219

 

$

8,674,177

 

 

 













Gross Profit

 

$

757,684

 

$

1,010,808

 

$

1,644,374

 

$

3,080,593

 

 

 













Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling Expenses

 

$

73,914

 

$

220,771

 

$

298,855

 

$

750,005

 

General and administrative expenses

 

$

618,303

 

$

797,777

 

$

2,088,959

 

$

2,609,456

 

Depreciation and Amortization Expenses

 

$

54,083

 

$

53,886

 

$

160,939

 

$

169,020

 

Total Operating Expenses

 

$

746,300

 

$

1,072,434

 

$

2,548,753

 

$

3,528,481

 

 

 













Income (Loss) From Operations

 

$

11,384

 

$

(61,626

)

$

(904,379

)

$

(447,888

)

Other (Income) and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expenses

 

$

96,761

 

$

98,171

 

$

291,484

 

$

295,575

 

Interest Income

 

$

 

$

(141

)

$

(44

)

$

(212

)

 

 













Total Other (Income) and Expense

 

$

96,761

 

$

98,030

 

$

291,440

 

$

295,363

 

Loss before Provision for Income taxes

 

$

(85,377

)

$

(159,655

)

$

(1,195,819

)

$

(743,251

)

Income Tax Expenses

 

$

 

$

 

$

 

$

-6

 

 

 













Net Loss

 

$

(85,377

)

$

(159,655

)

$

(1,195,819

)

$

(743,251

)

 

 













Other Comprehensive Loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities

 

$

(1,128

)

$

(3,612

)

$

4,113

 

$

(7,511

)

 

 













Comprehensive Loss

 

$

(86,505

)

$

(163,267

)

$

(1,191,706

)

$

(750,762

)

 

 













Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share

 

$

(0.01

)

$

(0.02

)

$

(0.11

)

$

(0.07

)

Weighted average common shares outstanding

 

 

10,840,380

 

 

10,840,380

 

 

10,840,380

 

 

10,840,380

 















The accompanying notes are an integral part of these unaudited consolidated financial statements.

4



 

Laser Master International, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



 

 

 

 

 

 

 

 

 

 

For the Nine Months ended

 

 

August 31, 2009

         

August 31, 2008

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net Loss

 

$

  (1,195,819

)   

$

  (743,253

)  

Adjustments to reconcile Net Loss to net Cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

$

160,939

 

$

169,020

 

Bad Debt Expense

 

$

8,146

 

$

(23,066

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

$

1,225,759

 

$

2,546,132

 

Inventories

 

$

(709,447

)

$

(403,928

)

Prepaid Expenses and Other Current Assets

 

$

49,656

 

$

(323,395

)

Accounts payable and accrued expenses

 

$

(104,699

)

$

(1,049,136

)

Other Assets

 

$

429

 

$

 

Deferred income

 

$

97,088

 

$

49,225

 

 

 







Net Cash Provided By (Used In) Operating Activities

 

$

(467,948

)

$

221,599

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Investment in real estate joint ventures

 

$

(27,333

)

$

(325,933

)

Acquisition of property and equipment

 

$

(3,690

)

$

(7,506

)

 

 







Net Cash Used In Investing Activities

 

$

(31,023

)

$

(333,439

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from notes payable - related party

 

$

536,304

 

$

 

Payment of long-term debt

 

$

(124,891

)

$

(208,615

)

 

 







Net Cash Provided By (Used In) Financing Activities

 

$

411,413

 

$

(208,615

)

 

 







Net Decrease in Cash and Cash Equivalents

 

$

(87,558

)

$

(320,455

)

CASH AT BEGINNING OF PERIOD

 

$

266,992

 

$

601,962

 

 

 







Cash and Cash Equivalents - end of period

 

$

179,434

 

$

281,507

 

 

 







Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

Cash Paid For:

 

 

 

 

 

 

 

Interest

 

$

291,484

 

$

295,575

 

Taxes

 

 

 

 

 

Non-Cash Investing Activities:

 

 

 

 

 

 

 

Investment property note payable

 

 

 

$

139,230

 

Unrealized gain on investments, available for sale

 

$

4,113

 

$

7,511

 

 



The accompanying notes are an integral part of these unaudited consolidated financial statements.

5


LASER MASTER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of Laser Master International Inc. and its wholly owned subsidiaries (collectively the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying financial statements are unaudited for the interim periods, but include all adjustments (consisting only of normal recurring accruals) which management considers necessary to present fairly the financial position at August 31, 2009 and the results of operations and cash flows for all periods presented. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could vary from these estimates. These financial statements should be read in conjunction with the Company’s Annual Report at November 30, 2008, and for the year then ended, as filed with the Securities and Exchange Commission on Form 10-K.

The results reflected in the interim periods are not necessarily indicative of the results of the entire fiscal year to end on November 30, 2009.

Name and brief description of the Company’s trade names and wholly owned subsidiaries are summarized as follows:

Trade Names:

Flexo-Crafts Prints Inc.
Harrison First Realty Corp.
Passport Papers Inc.
East River Arts Inc.

Wholly-owned Subsidiaries:

1540 57 LLC

This company owns 100 acres of land in Swan Lake, New York.

SCP 2006-C23-033 LLC

This company owns a building in Chicago, Illinois which is leased to a retailer.

Allowance for Doubtful Accounts – The Company reserves for bad debts and creates its allowance by identifying specific Accounts Receivable by customer based upon age and collectability. When an account is determined to be uncollectible, it is removed from the accounts receivable and the allowance is reduced.

Inventories – Inventories which consist of mostly finished goods are stated at the lower of cost or market, with cost being determined by the weighted average first-in, first-out method.

6


LASER MASTER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment – Deprecation of property and equipment is computed by the straight-line method at rates calculated to amortize cost over the estimated useful lives which approximate 39 years for buildings and building improvements and 5 to 10 years for machinery and equipment, computer equipment and furniture and fixtures. Maintenance and repairs are charged to operations as incurred, while the cost of betterments and improvements is capitalized. The cost and related accumulated depreciation of assets sold or otherwise disposed of are eliminated from the accounts and any resulting gain or loss is reflected in operations.

Long-Lived Assets – The Company follows Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement requires that the Company review certain long-lived assets and identifiable intangibles for impairment or disposal whenever events or changes in circumstances indicated the carrying amount may not be recoverable. In that regard, the Company addresses recoverability based upon estimated non-discounted cash flow forecasts. The Company has determined that an impairment loss does not need to be recognized for applicable assets through the nine months ended August 31, 2009 and August 31, 2008.

Investments – Investments consist of real estate joint ventures. The Company accounts for the investments under the equity method.

Revenue Recognition – The Company recognizes revenues in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). Under SAB 104, revenues from merchandise sales are recorded when all four of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the Company’s price to the buyer is fixed or determinable; and collectability is reasonably assured. The Company reports its sales levels on a net revenue basis, with net revenues being computed by deducting from gross revenues the amount of actual sales returns and discounts.

Recently Adopted Accounting Pronouncements – In May 2009, the FASB issued SFAS No. 165, Subsequent Events. FAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which any entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. FAS 165 is effective for interim and annual periods ending after June 15, 2009 and applies prospectively. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows. The Company evaluated all events and transactions after August 31, 2009 up through October 20, 2009, the date these financial statements were issued. During this period, the Company did not have any material recognizable or nonrecognizable subsequent events.

The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on their results of operations, financial position or cash flows.

NOTE 2 – INVESTMENTS

As of August 31, 2009, the Company is a one-third member of a limited liability company that is a 55% member of another limited liability company which is a real estate joint venture. As of August 31, 2009 the Company contributed $617,903 to the joint venture which represented 33% of the total capital of the joint venture. For the periods ended August 31, 2009 and August 31, 2008 there were no earnings or losses in the joint venture for the Company to recognize.

7


LASER MASTER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of August 31, 2009, the Company is a one-third member of a limited liability company that is a 55% member of another limited liability company which is a real estate joint venture. As of August 31, 2009 the Company contributed $591,000 to the joint venture which represented 33% of the total capital of the joint venture. For the periods ended August 31, 2009 and August 31, 2008 there were no earnings or losses in the joint venture for the Company to recognize.

As of August 31, 2009, the Company is a 7.75% member of a limited liability company which is a real estate joint venture. As of August 31, 2009 the Company contributed $799,000 to the joint venture which represented 21% of the total capital of the joint venture. For the periods ended August 31, 2009 and August 31, 2008 there were no earnings or losses in the joint venture for the Company to recognize.

The properties covered by the above investments are currently being developed and are in the construction phase. All related costs have been capitalized by the respective joint ventures. Based on estimates provided by the real estate management and development companies as to the fair values of the above properties, the Company believes that as of August 31, 2009, no impairment exists for the above investments.

NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following as of:

 

 

 

 

 

 

 

 

 

 

August 31, 2009

     

November 30, 2008

   

 

 


 


 

Prepaid Insurance

 

$

2,514

 

$

47,909

 

Prepaid Inventory

 

 

105,837

 

 

444,983

 

Receivable due from Factor

 

 

88,293

 

 

546,675

 

Receivable due from Supplier

 

 

27,855

 

 

 

Prepaid manufacturing expense

 

 

171,649

 

 

 

Deposits to suppliers

 

 

599,336

 

 

 

Other

 

 

12,628

 

 

18,201

 

 

 







Total

 

$

1,008,112

 

$

1,057,768

 

 

 







NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows as of:

 

 

 

 

 

 

 

 

 

 

August 31, 2009

     

November 30, 2008

   

 

 


 


 

Land

 

$

1,799,787

 

$

1,796,735

 

Building and improvements

 

 

7,747,555

 

 

7,747,346

 

Machinery and equipment

 

 

73,382

 

 

73,382

 

Computer equipment, furniture and fixtures

 

 

150,544

 

 

150,544

 

 

 







Total Fixed Asset

 

 

9,771,268

 

 

9,768,007

 

Less accumulated depreciation

 

 

(722,045

)

 

(561,535

)

 

 







 

 

$

9,049,223

 

$

9,206,472

 

 

 








8


LASER MASTER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended August 31, 2009 and August 31, 2008 depreciation expense totaled $160,939 and $169,020 respectively.

NOTE 5 – OTHER ASSETS

Other assets are primarily comprised of the cash value of company owned life insurance on key employees. As of August 31, 2009 and November 30, 2008 the cash value was $24,451 and 24,880 respectively.

NOTE 6 – ACCRUED EXPENSES

 

 

 

 

 

 

 

 

 

 

August 31, 2009

     

November 30, 2008

   

 

 


 


 

Audit, Accounting, Legal, Professional Fee

 

$

10,125

 

$

45,000

 

Environmental

 

 

59,494

 

 

59,494

 

Other Accrued expenses

 

 

177

 

 

1,158

 

 

 







Total

 

$

69,796

 

$

105,652

 

 

 







NOTE 7 – SHORT-TERM DEBT – RELATED PARTY

During, 2009, the Company borrowed $526,304 from a related party. The loan has no terms of repayment, is unsecured and bears no interest.

NOTE 8 – LONG-TERM DEBT

Long-term debt is comprised of the following as of:

 

 

 

 

 

 

 

 

 

 

August 31, 2009

     

November 30, 2008

   

 

 


 


 

Mortgage with a bank due December 10, 2028, secured by a building. Fixed monthly payments of $45,570. Interest @ 6.036% per annum.

 

$

6,231,066

 

$

6,385,987

 

 

 

 

 

 

 

 

 

Notes payable due to a related party for 52.5% ownership of investment property. Note matures on February 19, 2013. Interest @ 6% per annum

 

$

40,030

 

 

 

 

 

 

 

 

 

 

 

 

Less current maturities

 

$

(176,425

)

$

(168,635

)

 

 







Total long-term debt

 

$

6,094,671

 

$

6,217,352

 

 

 








9


LASER MASTER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 –RENTAL INCOME

The Company owns an investment property in Chicago, Illinois. The investment property is being leased to a retailer for fixed monthly rental payments of $45,571 per month over 265 months. The lease term is 302 months expiring January 1, 2032, however, no rental payments are required from the lessee for the final three years of the lease term. The Company is recording the rental income under the straight-line method. As a result, as of August 31, 2009 and November 30, 2008 the Company has deferred income of $227,342 and $130,254, respectively. For the nine month periods ended August 31, 2009 and August 31, 2008 the Company recognized rental income of $364,500 and $374,475, respectively. As of August 31, 2009 the cost of the property was $7,715,526 and the accumulated depreciation was $552,717 for a net book value of $7,162,809.

10


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The statements contained in this report that are not historical are forward-looking statements, including statements regarding our expectations, intentions, beliefs or strategies regarding the future. Forward-looking statements include our statements regarding liquidity, anticipated cash needs, and availability and anticipated expense levels. All forward-looking statements included in this report are based on information available to us on this date, and we assume no obligation to update any such forward-looking statement. It is important to note that our actual results could differ materially from those in such forward-looking statements. The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes appearing elsewhere in this report.

Overview

Historically our principal business has been printing for the textile and gift wrap paper industry using a computerized laser printing system. We have experienced significant price competition from low-cost printing operations in other countries, particularly China. In response to this competitive pressure we diversified our customer base to national retail chain stores, and broadened our product line into different types of packaging and gift wrap products. We currently purchase our products from the domestic USA markets, China and other countries. We have in house design, creative and prepress departments and also use outside sources for these services. Generally, we have had no trouble finding domestic or overseas suppliers. We are experiencing price increases due to the exchange rate of the US dollar versus foreign currencies and the general cost increase of raw materials, energy and labor.

Three months ended August 31, 2009 compared to three months ended August 31, 2008.

Revenues were $2,275,579 for the three months ended August 31, 2009 compared to $3,945,837 for the three months ended August 31, 2008. Revenue decreased approximately 42.33% for the quarter ended August 31, 2009 due to a general slowdown in retail sales and our customers having inventory overstock. Our gross margin for the three months ended August 31, 2009 was 33.30% compared to 25.62% for the three months ended August 31, 2008. Selling expenses for the three months ended August 31, 2009 decreased as a percentage of revenue from $220,771 (5.59% of revenue) for the three months ended August 31, 2008 to $73,914 (3.25% of revenue) for the three months ended August 31, 2009. General and administrative expenses for the three months ended August 31, 2009 decreased to $618,303 (27.17% of revenue) from $797,777 (20.22% of revenue) as for the three months ended August 31, 2008.

Interest expense was $96,761 and $98,171 for the three months ended August 31, 2009 and for the three months ended August 31, 2008, respectively.

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Nine months ended August 31, 2009 compared to nine months ended August 31, 2008.

Revenue decreased approximately 51.17% for the quarter ended August 31, 2009 ($5,739,593) for the nine months ended August 31, 2009 compared to $11,754,7700 for the nine months ended August 31, 2008 due to a general slowdown in retail sales and our customers having inventory overstock. Our gross margin increased to 28.65% for the nine months ended August 31, 2009 compared to the nine months ended August 31, 2008 of only 26.21%. Selling expenses decreased to $298,855 (5.20% of revenue) for the nine months ended August 31, 2009 from $750,005 (6.38% of revenue) for the nine months ended August 31, 2008. General and administrative expenses for the nine months ended August 31, 2009 decreased to $2,088,959 (36.40% of revenue) from $2,609,456 (22.20% of revenue) for the nine months ended August 31, 2008.

Interest expense was $291,484 and $295,575 for the nine months ended August 31, 2009 and for the nine months ended August 31, 2008, respectively.

Liquidity and Capital Resources.

For the Nine months ended August 31, 2009 the Company had cash flow used in operations of $(467,948).

Liquidity is sustained principally through funds provided from operations, the factoring facility and loans from related party.

Inventories are up as a percentage of our current assets as of the close of the quarter (approximately 52.15% as of August 31, 2009 versus approximately 30.32% as of November 30, 2008), and accounts receivable are down as a percentage of current assets as of that date (approximately 18.70% as of August 31, 2009 versus approximately 41.75% as of November 30, 2008), due to our seasonal sales which increased our accounts receivable in the fourth quarter of 2008.

Cash plus accounts receivable and inventory exceeded our current liabilities. We believe we will be able to meet our cash requirements for the next 12 months without additional financing based on current projected sales.

The Company has arranged for a factoring facility of up to $5,000,000. The Company agreed to offer for sale to the factor certain of its accounts. The factor has the absolute right in its sole discretion to reject any or all offered accounts. The factor may advance up to 85% of the face value of the invoices. The remaining 15% of balance is received when the customer pays the invoice to the factor.

Each account is purchased by the factor without recourse against the Company. All losses incurred by the factor from the financial inability of the applicable account debtor to pay such account over and above any and all residual payments and reserve amounts offset shall be borne solely by the factor.

As of November 30, 2008 and August 31, 2009, the factor charges the Company 1% of the invoice amount if the customer repays the invoice within 60 days and 1.25% for up to 90 days.

The factor has a security interest in all of our accounts receivable, inventory, deposit accounts, and general intangibles. We find that this arrangement is a convenient and cost efficient way to turn our accounts receivable into cash on an as needed basis.

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Critical Accounting Policies and Estimates

Use of Estimates. In preparing our financial statements, we must make a number of estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions, and these differences may be material. We believe the following critical accounting policies affect our more significant judgments and estimates used in preparing our financial statements.

Allowance for Doubtful Accounts – We reserve for bad debts and create our allowance by identifying specific accounts receivable by customer based upon age and collectibility. When we determined that an account is uncollectible, we remove it from the accounts receivable and reduce the related allowance. Our estimates of collectibility are based on a number of subjective factors including our appraisal of the particular customer’s history with us into any identifiable factors that may particularly affect that customer’s segment of the market. If our estimates as to collectibility are incorrect the amount of our reserve may be too small, resulting in greater future charges to income if and when the uncollectibility of that account becomes clear. If we were to apply another method of determining our allowance for doubtful accounts, such as applying historical percentages to the aggregate dollar amount of accounts outstanding, the result in any particular period could be very different.

Inventories – Inventories which consist of mostly finished goods are stated at the lower of cost or market, with cost being determined by the weighted average first-in, first-out method. The effect of this policy is to reduce the cost of goods sold when cost of inventory are rising as compared to the cost of goods sold that would apply if we were to determine cost on a last in first-out basis. Conversely, our policy would result in a reduction in the cost of goods sold during periods of falling inventory prices.

Property and Equipment – We compute depreciation of property and equipment by the straight-line method at rates calculated to amortize cost over the estimated useful lives which approximate 39 years for buildings and building improvements and 5 to 10 years for machinery and equipment, computer equipment and furniture and fixtures. We charge maintenance and repairs to operations as incurred, while we capitalize the cost of betterments and improvements. The cost and related accumulated depreciation of assets sold or otherwise disposed of are eliminated from the accounts and any resulting gain or loss is reflected in operations. If we were to apply shorter useful lives in estimating the applicable depreciation, depreciation expense would be higher. In addition, we must apply judgment in determining whether particular work should properly be regarded as maintenance and repairers, and not a long-term increase in the value of the underlying asset. To the extent that we classify work on an asset as a cost of that asset rather than an expense to be deducted currently, our stated earnings for the applicable period would be increased.

Long-Lived Assets – We follow Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement requires us to review certain long-lived assets and identifiable intangibles for impairment or disposal whenever events or changes in circumstances indicated the carrying amount may not be recoverable. We address recoverability based upon estimated non-discounted cash flow forecasts. Technological changes and other changes in the marketplace may result in a particular asset’s becoming recoverable in a shorter period of time than we have estimated. If that were to occur, our earnings would be reduced at such time as we determined that our initial estimate was too long. We have determined that we do not need to recognize an impairment loss for applicable assets through August 31, 2009 and 2008.

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Revenue Recognition – We recognize revenues in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). Under SAB 104, we record revenues from merchandise sales when all four of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the Company’s price to the buyer is fixed or determinable; and collectibility is reasonably assured. We report our sales levels on a net revenue basis, with net revenues being computed by deducting from gross revenues the amount of actual sales returns and discounts. The determination of whether collectibility is reasonably assured is in substantial part subjective. If we are too optimistic in estimating collectibility, revenues would be overstated for the period prior to our becoming aware that an account has become uncollectible.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Smaller reporting companies are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including our Chairman, Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report, and based on their evaluation, our Executive Chairman, Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Executive Chairman, Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal controls.

There were no significant changes in our internal controls or in other factors that could significantly affect our internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Smaller reporting companies are not required to provided the information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits required by this Item are set forth in the Exhibit Index attached hereto.

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SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

 

LASER MASTER INTERNATIONAL, INC.

 

 

 

 

Date: October 20, 2009

By:  

/s/ Mendel Klein

 

 


 

 

Name:  

Mendel Klein

 

 

Title:

Chief Executive Officer and

 

 

 

Chief Financial Officer

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EXHIBIT INDEX

 

 

 

Exhibit
No.

 

Description


 


 

 

 

31.1

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.

 

 

 

32.1

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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